European Markets Fall on Weak Commodities, Philips to Spinoff Lightning Unit

Lucy Stoeva
25 Apr, 2016
New York City

Stocks in Europe fell for the second day in a row on the weakness in commodity stocks and a slight fall in business confidence in Germany. Philips plans to spin off its lighting unit. Deutsche Bank

[R]4:00 PM Frankfurt, Germany – Stocks in Europe declined for the second day in a row on the weakness in commodity stocks and a slight decline in business confidence in Germany. Philips plans to spin off its lighting unit through an initial public offering. Deutsche Bank’s mounting legal costs led to an open conflict on its supervisory board.[/R]

Stocks in Europe declined for the second day in a row on the weakness in resource sector stocks, a slight decline in German business confidence outlook and investors reacted negatively with the Electricite de France’s plan to go ahead with the nuclear plant.

In France, EDF plummeted 10.1% as the French utility moved forward with its $26 billion nuclear-reactor project in the U.K. despite its debt. EDF approved a capital increase last week to finance the project.

In Germany, business climate slightly cooled down in April. The Ifo business climate index, a closely-watched indicator of business confidence, fell to 106.6 in April from 106.7 in March. The outlook sub-index, however, rose by 0.4 points.

Among major decliners in Frankfurt, Volkswagen lost 2.1%, industrial conglomerate ThyssenKrupp AG erased 4.5%, E.ON fell 2.8%, and Deutsche Bank tumbled 4.8%

In the U.K., mining stocks recorded the largest losses as the price of copper fell. Shares of Anglo American plummeted 7.3%, BHP Billiton tumbled 5.8% Rio Tinto lost 4.1%, Glencore dropped 4.3%, and Antofagasta shed 1.9%.

Shares of BP fell 1.8% to 361.7 pence ahead of its earnings announcement scheduled on Tuesday.

Brent crude oil futures added 0.7% to $45.41 per barrel and WTI crude oil futures inched up 0.1% to $43.76 per barrel in afternoon trading.

Investors looked ahead at the rate decision in the U.S. on Wednesday and the meeting of the Bank of Japan on Thursday to shed more light on the direction of interest rates and the global economy.

In London, the FTSE 100 index lost 47.98, or 0.76 %, to 6,262.46, while in Frankfurt, the DAX index fell 97.79, or 0.94%, to 10,275.70.

In Paris, the CAC 40 index dropped 28.72, or 0.63%, to 4,540.94.

Philips N.V shed 4.2% to €24.07 after the Dutch technology company released its first-quarter results and said it was likely to spin off its lighting division through an initial public offering.
The company continues to evaluate proposals in an attempt to find a buyer for the 125-year-old lighting arm and focus on its health-care business.

First-quarter net profit tumbled 63% to €37 million from last year, as charges related to the separation of the lighting business piled. Adjusted EBITDA rose 14% to €374 million, while sales grew 3% to €5.5 billion from the first-quarter of 2015.

Philips maintained its outlook for 2016 and confirmed it expects improvement in earnings.

Deutsche Bank AG lost 4.4% to €16.1 after legal costs and handling of investigation on misconduct led to an open conflict on its supervisory board.

Alfred Herling, a labor representative on supervisory board, publicly criticized another member, Georg Thoma, of going too far in probing potential wrongdoing.

“Thoma increasingly faces criticism for his overzealousness and judicial self-fulfillment,” Alfred Herling said. “He is overshooting by calling for ever broader investigations and deploying even more lawyers.”

The bank’s costs for fines and lawsuits have increased in the past years and harmed profits and capital ratios.