European shares end lower on rate cut jitters; Richemont shines

European shares end lower on rate cut jitters; Richemont shines

By Ankika Biswas and Johann M Cherian

(Reuters) -European shares closed lower on Friday, as investors turned cautious following remarks from a policymaker on the outlook for monetary policy, while Richemont logged its best day in over three months after announcing a management rejig.

The pan-European STOXX 600 dipped 0.1%, with the rate-sensitive real estate sector among top decliners, pressured by higher euro zone bond yields.

A report showed European Central Bank board member Isabel Schnabel advocated caution about further interest rate cuts after a likely first one in June, bringing uncertainties about the outlook for rate reductions to the fore.

On the data front, a final reading of euro zone inflation confirmed a previous report that showed prices increased 2.4% on an annual basis in April.

ECB policymakers have not offered clarity on the outlook of rate cuts beyond June, while U.S. Federal Reserve policymakers have not openly shifted their views about rate cut timing despite recent encouraging U.S. economic data.

“The market is in a good place in medium term. Central banks are doing what they can and they still want to cut this year, but just very steadily,” said Chris Beauchamp, chief market analyst at online trading platform at IG.

“The worry is if inflation starts to move higher, so that’s one thing to keep an eye on, particularly heading into June and beyond.”

The main equities index managed to end its second straight week in gains, rising for nine straight sessions till Wednesday, as a robust earnings season offered a fresh boost to the prevailing upbeat investor sentiment.

According to LSEG data, of the 239 companies in the STOXX 600 that have reported quarterly earnings as of Tuesday, over 60% have exceeded analyst estimates, more than a long-term average of 54%.

Azelis fell 13% to notch its worst day on record after major shareholders EQT Partners and PSP Investments sold shares in the specialty chemicals maker.

Nibe lost 11.9% and bottomed the STOXX as Citigroup downgraded the Swedish heat-pump maker to “neutral” from “buy”.

On the flip side, Switzerland’s main index outperformed, driven by a 5.3% in Richemont after the luxury company reported what Jefferies analysts described as “reassuringly resilient” fourth-quarter results, and naming Nicolas Bos as group CEO. The broader luxury sector was up 1%.

German’s main index was flat, with utility firm E.ON down 5.2% on trading ex-dividend.

Lagercrantz Group AB jumped 5.3% to top the STOXX 600 after fourth-quarter earnings, while H&M rose 3.4% after RBC upgraded the fashion retailer to “outperform” from “sector perform”.

French re-insurer Scor dropped 6% after first-quarter results missed expectations.

Investors also await ratings agency Fitch’s review of Spain’s credit rating.

(Reporting by Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Janane Venkatraman and Richard Chang)