Rates on Hold in Europe, Ericsson and Pernod Ricard Fall on Weak Results

Lucy Stoeva
21 Apr, 2016
New York City

Stocks in Europe retreated after the ECB kept rates unchanged, several major companies posted disappointing earnings, and oil continued to decline. Ericsson

[R]4:00 PM Frankfurt, Germany - Stock markets in Europe retreated after the ECB kept rates unchanged, several major companies posted disappointing earnings, and oil continued to decline. Ericsson’s quarterly sales dropped 2.4%. Volkswagen reportedly reached an agreement with the U.S. authorities to buy back diesel cars with manipulated emission-control software.[/R]

Stock markets in Europe declined after the European Central Bank kept rates unchanged, several major companies posted disappointing earnings, and oil continued to decline.

The European Central Bank decided to keep interest rates at their current low levels, in-line with its policy to stimulate economic recovery and inflation. Currently, the deposit rate is -0.4% and the main refinancing rate is zero.

Mario Draghi, president of the ECB, said the bank would start its corporate bond purchases and a new round of bank refinancing in June.

In Sweden, the central bank also kept rates unchanged, but increased its quantitative easing program with 45 billion Swedish kronor, or $5.6 billion.

Swedish telecom equipment provider Ericsson and French spirits maker Pernod Ricard tumbled 10.6% and 4.9%, respectively, after both companies reported lower-than-expected quarterly earnings.

Volkswagen jumped 1.5% on media reports that the company had reached an agreement with U.S. authorities to buy back or repair 500,000 diesel cars with manipulated emission-control software.

Brent crude oil futures dropped 1.9% to $44.91 per barrel and WTI crude oil futures tumbled 2% to $43.28 per barrel.

Nevertheless, energy complex stocks recorded modest gains. Subsea 7 climbed 1.6% and Statoil advanced 2.9% in Oslo. Tullow Oil gained 2.9%, BP was up 0.9%, and Royal Dutch Shell rose 1.1% in London.

In France, business sentiment in the manufacturing sector improved to 104 in April from 102 in March, according to Insee, the National Institute of Statistics and Economic Studies.

However, business confidence, which also includes services, wholesale, construction and retail, was flat at 101 in April, Insee said.

A reading above 100 indicates a level above the long-term average.

In the U.K., retail sales volumes declined 1.3% in March from the previous month, the Office for National Statistics said. Compared to the same period last year, retail sales volumes were up 2.7%, indicating the 35th consecutive month of annual growth.

In London, the FTSE 100 index lost 42.92, or 0.67%, to 6,367.34, while in Frankfurt, the DAX index fell 29.96, or 0.29%, to 10,391.33.

In Paris, the CAC 40 index dropped 20.26, or 0.44%, to 4,571.66.

Ericsson plummeted 10.6% to 68.85 Swedish kronor after the telecom equipment provided posted first-quarter sales below markets expectations.

First-quarter sales dropped 2.4% to 52.2 billion kronor from a year ago, reflecting contraction of business on multiple markets.

CEO Hans Vestberg plans to accelerate cost cutting and to reorganize the company for expansion beyond the wireless-network market. In 2016, the company plans to improve profitability, increase software sale, and reduce costs beyond the announced 9 billion kronor annually.

Job cuts and changes in the management team are also in the pipeline.

Pernod Ricard SA fell 4.9% to €98.67 after the drinks maker posted disappointing quarterly revenues as demand in China weakened.

Third-quarter sales grew 1% to €1.86 billion from a year ago, but came below market expectations.

Organic sales in the Americas rose 11% due to strong sales of Jameson Irish whiskey and a growing market in Cuba. In China, however, sales retreated 5% on continuous decline in demand for Scotch and disappointing New Year sales.

The company confirmed its full-year guidance of 1% to 3% organic profit growth from recurring operations.