European Markets Drop 1%, Airbus and Spanish Banks in Focus

Lucy Stoeva
28 Apr, 2016
New York City

European markets closed down after a broad selloff after the Bank of Japan decided not to increase its stimulus program and left interest rates unchanged. CaixaBank and BBVA posted double-digit declines in first-quarter net profit. Airbus earnings dropped on production delays and weaker demand.

[R]4:00 PM Frankfurt, Germany - European markets closed down after a broad selloff after the Bank of Japan decided not to increase its stimulus program and left interest rates unchanged. CaixaBank and BBVA posted double-digit declines in first-quarter net profit. Airbus earnings dropped on production delays and weaker demand.[/R]

European markets decline across most sectors after the Bank of Japan decided not to increase its asset purchase program and left interest rates unchanged and leading European companies posted disappointing results.

Following the BOJ decision, the yen surged 3% against the euro to €0.0082, while the Nikkei 225 index dropped 3.6%.

Banks led the decliners in European markets trading.

In Spain, CaixaBank and BBVA disappointed investors by posting double-digit declines of first-quarter net profit. Shares of CaixaBank lost 2.7%, while BBVA tumbled 8.4%.

In Germany, Deutsche Bank reported a sharp drop in net profit but results were ahead of expectations.

In the U.K., Lloyds fell 2.3% after the lender reported a slight decline in pre-tax underlying profit.

Investors largely neglected positive data releases about economic sentiment and business climate in the euro zone, as well as the latest unemployment data from Germany.

Economic sentiment in the euro zone grew to 103.9 in April from 103 in March, according to data from the European Commission. The increase was based on more optimism in industry, services, construction, and among consumers.

In addition, the EC business climate index improved to 0.13 in April from 0.12 in March.

Consumer expectations of price trends over the next 12 months rose to 2.9 in April from 2.1 in March, but remained significantly below the long-term average of 19.3.

Companies'' expectations of producer prices increased to -2.4 from a revised -4.6 in March.

In Germany, the adjusted unemployment rate was unchanged at record low 6.2% in April and jobless claims fell by 16,000, the Federal Labor Agency said.
In London, the FTSE 100 index lost 64.77, or 1.02%, to 6,255.14, while in Frankfurt, the DAX index dropped 126.14, or 1.22%, to 10,173.69.

In Paris, the CAC 40 index fell 65.33, or 1.43%, to 4,494.07.

In Madrid, the IBEX 35 shed 2.11% to 9,135, dragged down by the banking stocks.

Airbus tumbled 5.7% to €55.11 after the company reported a 23% decline in first-quarter earnings to €501 million, and warned of production issues with its A400M military plane.

Profits in the helicopter business were harmed by weaker demand from the oil industry.

The company maintained its 2016 earnings forecast as it plans to compensate for the production delays later in the year.

BBVA SA plunged 8.5% to €6.17 after the Spanish bank said first-quarter profit fell 54% to €709 million due to lower trading revenue and currency fluctuations.

Net trading income dropped to €357 million from €775 million a year earlier. Net interest income, however, rose to €4.15 billion from €3.66 billion a year earlier.

The strength of the euro against currencies in Argentina and Mexico, where the bank has large operations, was among the main reasons for the decline.

Bad loans represented 5.3% of total loans, down from 5.4% at the end of 2015.

CaixaBank SA lost 2.6% to €2.74 after the Madrid-based bank said first-quarter net profit fell 27% to €273 million due to low interest rates and weak demand for credit.

The bank is in the process of acquiring the 56% of Portugal’s Banco BPI that it doesn’t already own for about €900 million.

Net interest income declined to €1.02 billion from €1.14 billion a year ago, while net fees dropped 9% due to market volatility.

Bad loans decreased to 7.6% of total lending from 7.9% at the end of December.

Deutsche Bank gained 1.9% to €17.02 after the bank said first-quarter net income fell 58% to €236 million, while the market was expecting a net loss of €249 million.

Revenue fell 22% in the first-quarter to €8.9 billion, reflecting the difficult environment and the impact of downsizing and exiting certain businesses.

Marcus Schenck, CFO, said the bank was trying to accelerate the cost cutting planned until 2018 as a reaction to market volatility.

Electrolux AB jumped 9.5% to 233.10 Swedish kronor after the largest maker of home appliances in Europe posted better-than-expected profit.

First-quarter operating profit doubled to SEK 1.27 billion from SEK 516 million a year ago due to solid growth in both EMEA and North America.

Electrolux increased its 2016 forecast for growth in the U.S. to 4% to 5% from the previously expected 3% to 4% growth. The growth forecast for Western Europe remained unchanged at 2% to 3%.

Sanofi SA erased 1.9% to €75.5 after the French pharmaceutical company made a bid of $9.3 billion for San Francisco, California based Medivation Inc to expand its cancer business.