European share rally pauses as HSBC, Volkswagen sag

Mon Feb 24, 2014 7:28am EST

* FTSEurofirst 300, Euro STOXX 50 steady
    * About 5.6 bln euros wiped off Volkswagen's market cap
    * Worries over Chinese credit restrictions hit miners
    * Europe equity funds see further brisk inflows -EPFR

    By Blaise Robinson
    PARIS, Feb 24 (Reuters) - European shares were steady around
midday on Monday as worse-than-expected results from HSBC
 and a disappointing outlook from Volkswagen 
took the wind out of the sails of the market's recent rally.
    Shares in Europe's largest bank fell 3.6 percent after
posting results that fell short of market expectations and
warned of greater volatility in emerging markets.
 
    The drop was even sharper for Volkswagen, sinking 6.7
percent in massive volumes after it issued a disappointing 2014
outlook and unveiled plans to buy out minority shareholders of
Scania, sending shares of the truck maker up 32
percent. 
    The slide in the shares of Volkswagen - Germany's biggest
blue-chip by market value - wiped about 5.6 billion euros ($7.7
billion) from the group's market capitalisation.
    "The weak guide for 2014 and the rich bid for Scania will
likely dent sentiment and perpetuate the view that management is
more focused on being big at the expense of shareholder
returns," analysts at Barclays said in a note, cutting their
recommendation on Volkswagen's stock to 'equal weight' from
'overweight'.
    At 1202 GMT, the FTSEurofirst 300 index of top 
European shares was up 0.04 percent at 1,343.46 points, while
the euro zone's blue-chip Euro STOXX 50 index was up
0.1 percent at 3,134.60 points.
    Worries brewing over credit restrictions on China's property
sector also kept investors on edge. Chinese shares fell on
Monday, knocked by news reports saying Chinese banks had begun
tightening property loans. 
    Mining shares, which have a big exposure to resource-hungry
China, retreated, with Rio Tinto down 1.6 percent and
Anglo American down 1.7 percent.
    Around Europe, UK's FTSE 100 index was down 0.2
percent, Germany's DAX index up 0.05 percent, and
France's CAC 40 up 0.3 percent.
    Spanish stocks outperformed, however, with Banco Santander
 and BBVA rising 0.8 and 1.1 percent
respectively, after Moody's raised Spain's sovereign debt rating
one notch to Baa2 with a "positive" outlook.  
    European stocks have risen sharply over the past 2-1/2
weeks, with the CAC-40 hitting a 5-1/2 year high on Friday,
boosted by hopes of a recovery in the region's economic growth
and corporate profits this year.
    "The prospect of a pick-up in growth in the euro zone has
been one of the big catalysts for the market in the past few
weeks," FXCM analyst Vincent Ganne said.
    "With a lot of data coming out this week including Friday's
inflation figures, fund managers' risk appetite will be tested.
We need more positive news otherwise investors will start having
doubts."
    Euro zone inflation data due on Friday will be closely
watched by investors eager to gauge whether the European Central
Bank has enough ammunition to ease monetary policy in the
following week. 
    Lifting sentiment on Monday, data showed German business
morale rose in February to its highest level since July 2011.
 
    Overall, investors remain positive on European stocks, with
the latest EPFR Global data showing further brisk inflows into
the region. At the country level UK, Spain and Italy equity
funds again enjoyed solid inflows, EPFR said.
    So far this year, Europe equity funds have taken in over $24
billion, versus $5 billion at the same point in 2013. Europe
equity funds have also attracted retail money for the sixth
straight week, the longest such run since late 2006, EPFR said.
    
    Europe bourses in 2014:Asset performance in 2014:Today's European research round-up
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