UPDATE 3-Siemens, BASF profit warnings hurt European shares

Thu Jul 25, 2013 12:54pm EDT

* BASF, Siemens warnings hit Germany's DAX

* FTSEurofirst 300 closes 0.5 percent lower

* Charts signal more near-term selling pressure

* Miners fall sharply on China concerns

By Atul Prakash

LONDON, July 25 (Reuters) - Profit warnings by German heavyweights BASF and Siemens hit the country's stock index on Thursday and cast a shadow over the broader European market, which was seen vulnerable to further declines.

The world's top chemicals group BASF warned on its 2013 profit outlook, while engineering group Siemens, Germany's second-biggest company by market value, said it did not expect to reach its 2014 profit margin target.

Their shares fell 4.5 percent and 6 percent, respectively, taking the most points off Germany's DAX index, down 1 percent, and leading fallers across the FTSEurofirst 300 index , which closed 0.5 percent lower at 1,209.11 points.

"More companies, especially cyclicals, could disappoint next week when about three dozen major firms announce results, as many companies suffered in the second quarter due to sluggish industrial production and slowing growth in emerging markets," said Christian Stocker, strategist at UniCredit in Munich.

"The DAX could fall another 5 to 8 percent during the summer months, but I don't see any further major fall as improving economic fundamentals would keep the markets underpinned."

The wider market fell as other major companies disappointed. Consumer goods giant Unilever warned growth was slowing in emerging markets, beermaker SABMiller's lager volumes shrank and Swiss industrial group ABB's net profit missed expectations. Their shares fell 1.5 to 3.1 percent.

The market lacked direction as investors struggled to choose between positives and negatives. Stocks were supported by signs of an economic recovery in Europe and the United States, but concerns of a cut in U.S. stimulus, slowing Chinese growth and disappointing earnings slowed upward momentum, analysts said.

About 23 percent of the STOXX Europe 600 companies have reported second-quarter results so far, with half of the firms meeting or beating profit forecasts, according to Thomson Reuters StarMine data. In contrast, 74 percent of U.S. S&P 500 companies have met or beaten expectations.

Charts suggested major indexes could face further selling pressure in the near term after failing to move beyond key targets. The euro zone's blue-chip STOXX Europe 600 index fell 0.4 to 2,740.29 points after touching a horizontal resistance level at 2,750.

"I expect some more setbacks for the index," Commerzbank technical analyst Sophia Wurm said. "An attempt to overcome the medium-term resistance zone of 2,800- 2,850 should not be on the technical agenda in the coming trading days."

Stocker of UniCredit said that in the current environment, investors should buy stocks such as Swiss drugmaker Roche which have structural growth potential, adding he was "overweight" the healthcare, food and beverage, and personal household goods sectors for their positive growth momentum.

Roche, up 0.6 percent, outperformed after beating first-half profit forecasts following strong sales.

Miners were hit hard, with the STOXX Europe 600 basic resources index falling 1.9 percent on mounting worries about China following recent poor manufacturing data.

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