July 24, 2017 / 7:37 AM / 2 years ago

Autos, airlines hit in sluggish start to European trading week

LONDON (Reuters) - European shares dipped on Monday with the autos sector hitting its lowest level this year after anti-trust regulators opened an investigation into regional carmakers while price war worries hurt airlines.

Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, July 21, 2017. REUTERS/Staff/Remote

The pan-European STOXX 600 fell 0.1 percent as gains in the heavyweight financials sector helped offset losses elsewhere. Euro zone bluechips fell 0.2 percent.

Gemalto plummeted as much as 17 percent, the worst performer on the day, after the digital security company warned on profits for the fourth time since October on Friday after trading, citing continued weakness in its SIM-card and U.S. payments operations.

“We continue to see both these businesses with double-digit (sales) declines given our view of limited unit growth and pricing pressures,” said Credit Suisse analysts, cutting their target price. Societe Generale and Natixis slashed their recommendations on the stock.

Shares in carmakers fell after European Union antitrust regulators said they were investigating allegations of a cartel in the industry.

Volkswagen, Peugeot, Daimler, Renault and BMW all fell 1.2 to 2.5 percent, sending the autos index down 1.8 percent to a seven-month low, the worst-performing sector.

“It’s clearly bad for sentiment, which was already burned by the emissions scandal,” said Michael Punzet, autos analyst at DZ Bank.

“We expect high volatility related to the upcoming newsflow. Investors are clearly aware of the risks and they are selling the stocks.”

Jefferies analysts said: “One cannot rule out material fines should anti-competitive behavior be confirmed, up to the maximum allowed under EU rules.” That would be 10 percent of annual turnover, they added.

Budget airline Ryanair fell 4.7 percent, a top European loser, after it warned summer fares would face sharp cuts, though it said profit soared 55 percent in its first quarter.

Rivals Wizz Air and EasyJet sank 2 to 3 percent, while Lufthansa dipped 1.1 percent.

Switzerland’s third largest private bank Julius Baer led gainers, up 7.5 percent after reporting its biggest inflows since the financial crisis for its first half, helped by a push to recruit more private bankers.

“We expect the market EPS estimates to go up by a mid-single digit figure and argue that Baer deserves higher price-to-earnings multiples reflecting stronger net new assets,” said Baader Helvea analysts.

Among leading gainers was B&M European Value Retail, up 4.5 percent after a report that Asda, the British supermarket arm of U.S. retail giant Wal-Mart, was considering a 4.4 billion pound takeover bid.

Shares in Dutch healthcare technology firm Philips also gained 3.6 percent after its profit rose 15 percent in the second quarter, helped by strong sales of consumer personal care products.

Reporting by Helen Reid, Editing by Vikram Subhedar and John Stonestreet

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