European Markets Fall on Weak Earnings from Deutsche Bank, H&M and Roche

Lucy Stoeva
28 Jan, 2016
New York City

European stocks dropped in choppy trading as disappointing earnings and turmoil in the banking sector offset the rally in oil prices. Deutsche Bank reported its first annual loss since 2008. H&M net fell 11% due to unfavorable currency and the warm winter. Roche warned of growth slowdown in 2016.

[R]4:00 PM Frankfurt – European stocks dropped in choppy trading as disappointing earnings and turmoil in the banking sector offset the rally in oil prices. Deutsche Bank reported its first annual loss since 2008. H&M’s profits fell 11% due to unfavorable currency and the warm winter. Roche warned of growth slowdown in 2016.[/R]

European stocks dropped on Thursday as disappointing company earnings and turmoil in the banking sector offset the rally in oil prices.

European banks were among the worst performing sectors after Deutsche Bank reported its first annual loss since 2008, while investors still digest the effects of the EU program set to help Italian banks deal with non-performing loans.

The Eurozone Economic Sentiment Indicator fell in January as the turbulence on the global markets had a negative impact on the confidence of businesses and households, the European Commission said.

In the U.S., the Federal Reserve kept interest rates unchanged on Wednesday, but acknowledged that growth has slowed down since December and left the door open for softening of its policy in March.

Oil prices soared on Thursday after the Russian Energy Minister Alexander Novak said Saudi Arabia had proposed a cut of 5% supply for all oil producers.

Brent crude oil futures soared 5.05% to $34.77, while West Texas Intermediate crude oil rose 4.67% to $33.81.

In London, FTSE 100 index fell 70.27, or 1.17%, to 5,920.10 and in Germany, the DAX index plunged 227.25, or 2.30%, to 9,653.57.

In Paris, the CAC 40 index declined 75.40, or 1.72%, to 4,304.96.

Anglo American Plc soared 10.7% to 281 pence after the resource company said iron ore production in the fourth quarter increased 8.4%.

Diamond output declined 16% in 2015 from the previous year because of weaker demand.

The company plans to cut about 4,000 jobs in South Africa as part of its restructuring following the recent commodities rout.

Deutsche Bank AG tumbled 3.7% to €16.47 after the largest German bank reported its first annual loss since the financial crisis of 2008 due to restructuring, write-downs, and litigation charges.

Group revenues increased 5% to €33.5 billion in 2015, but the growth in expenses was much steeper and Deutsche Bank reported a net loss of €6.8 billion.

Chief Executive John Cryan asked for patience with the restructuring, which will continue in 2016.

The bank won’t raise capital, although restructuring and severance charges will reach about €1 billion in 2016 and litigation costs will be below the €5.2 billion.

No further write-downs are expected and no bonuses will be paid to the executive board.

Electrolux AB surged 5.7% to 200 Swedish kronor, despite reporting a fourth-quarter loss after the failed deal to buy GE''s white goods business.

Fourth-quarter operating loss reached 202 million kronor, compared with a profit of 1.4 billion kronor last year.

The Swedish appliance manufacturer, which already owns brands like AEG and Zanussi, took charge of 1.66 billion kronor after U.S. antitrust regulations canceled the deal with GE.

Hennes & Mauritz fell 4.9% to 281 Swedish kronor after the fashion retailer said fourth-quarter profits declined due to unfavorable currency fluctuations and the warm winter in Europe and North America.

Sales in the fourth-quarter rose 14% to 48.7 billion kronor following the expansion of H&M in India, South Africa, Peru and Taiwan.

Quarterly net profit dropped 11% to 5.5 billion Swedish kronor from a year earlier.

During the year H&M opened 413 new stores.

Roche Holding AG fell 3% to 256 Swiss francs after the pharmaceutical company reported net profit for 2015 below expectations and warned that growth would slow down in 2016.

Net income fell 5% to 8.86 billion Swiss francs from a year earlier.

Revenues increased to 48.15 billion francs in 2015 from 47.46 billion francs in 2014 due to strong sales in the U.S. and growing demand for its breast cancer drugs.