* FTSEurofirst 300 down 0.3 pct
* China hits profits at Remy, Hugo Boss
* Charts show scope for more gain on DAX
By Toni Vorobyova
LONDON, Nov 26 European shares lacked the
momentum to extend a rally to multi-year highs on Tuesday, with
a mixed outlook for corporate earnings underlined by downbeat
signals from Remy Cointreau and Hugo Boss.
Shares in Remy dropped 11.6 percent after the French spirits
group warned of a double-digit decline in full-year operating
profit because of a slowdown in China.
Subdued demand from China also hit performance at German
fashion house Hugo Boss, and shares fell 3.1 percent after it
delayed its 2015 profit target.
Investors had been expecting earnings to pick up this year
as the European and global economy improves, but so far this has
not happened and momentum - analyst upgrades minus downgrades -
remains mired in negative territory.
"European equities are beginning to be a little bit
stretched based on the fact that earnings expectations have not
completely reversed ... You are seeing the forward
(price-to-earnings) multiple rising, but the forward
expectations for earnings are actually flat and that's not
normally a very healthy sign," said Peter Garnry, strategist at
"I think it will change as we move into the new year and
everyone begins to revise up their targets for the euro area
Relatively light volumes underscored the still optimistic
investor stance, with most seeing Tuesday's move as a temporary
correction and a reason to buy on the dips rather than the start
of a downtrend. Volumes on the FTSEurofirst 300 stood at 22
percent of the 90-day daily average going into midsession.
The index itself was down 0.3 percent at 1,298.09 points
by 1133 GMT, in sight of a 5-year high of 1,316.42 set
earlier this month.
"Indexes are trading at 5-year highs, but stocks remain
cheap nevertheless," said Hans Stoter, chief investment officer
at ING Investment Management, who also expects European earnings
to improve next year and grow by about 12 percent on average.
"We have a positive bias for European equities."
Technical charts, too, pointed to the scope for more gains,
including in the German DAX, so far the only major
blue-chip European index to have followed Wall Street to record
highs this year. The DAX was steady at 9,297.85 points.
"While the recent strength in the DAX is reflected in
overbought readings on the daily, weekly and monthly RSI
(relative strength index) studies, recent price action remains
constructive," said Chris Wright, analyst at Informa Global
"Scope is therefore seen for further near-term strength
towards the 9,500.00 psychological resistance level ... where we
may see some profit-taking. However, with the 10,000.00 level
coming into view, any dips are viewed as corrective as bulls
look to resume the uptrend."