Volatile European Markets Close Higher; Aegon, C Agricole and KBC in Focus

Lucy Stoeva
12 May, 2016
New York City

European markets closed lower amid high volatility brought by oil prices and corporate earnings. Dutch insurer Aegon, French lender Credit Agricole and online fashion retailer Zalando reported disappointing first-quarter earnings. Howeverm KBC Group, RWE, and Zurich Insurance exceeded expectations.

[R]4:00 PM Frankfurt, Germany – European markets closed lower amid high volatility brought by oil prices and corporate earnings. Dutch insurer Aegon, French lender Credit Agricole and online fashion retailer Zalando reported disappointing first-quarter earnings. Howeverm KBC Group, RWE, and Zurich Insurance exceeded expectations.[/R]

European markets closed lower on Thursday after changing direction twice during the session in response to the swings in oil prices. In addition, latest corporate earnings reports also contributed to market volatility.

Oil prices were on the rise during the day after the International Energy Agency said the oversupply will dramatically decrease in the second-half of the year.

In the afternoon, however, oil futures changed course and the markets followed. Brent crude oil futures lost 0.5% to $47.36 per barrel, after trading higher than $48 earlier.

Contributing to the market decline, Dutch insurer Aegon lost 10.2%, French lender Credit Agricole sank 5.1%, and online fashion retailer Zalando erased 4.2% on disappointing first-quarter earnings.

On the upside, Belgian financial group KBC, German utility RWE, and Swiss insurer Zurich Insurance posted results that beat expectations, and recorded gains between 5% and 9%.

In the U.K., the Bank of England left its key interest rate unchanged at a record low 0.5%. The decision was in-line with expectations for no action before the June 23 referendum on the U.K exit from the European Union.

The central bank warned that an exit from the EU could materially affect the outlook for output and inflation and, as a result, the monetary policy.

In economic news, euro zone industrial output fell for the second straight month in March, indicating a slower than anticipated economic recovery.

Industrial production fell 0.8% in March from the previous month, but was 0.2% higher a year ago, Eurostat said.

In France, consumer prices rose 0.1% in April from March, lifted by higher oil prices, but dropped 0.2% from a year ago, the French statistics agency Insee said.

In Norway, the central bank kept interest rates at 0.5%, in-line with expectations, but said it may cut rates later in the year.

In London, the FTSE 100 index dropped 64.48, or 1.05%, to 6,098.01, while in Frankfurt, the DAX index erased 122.22, or 1.23%, to 9,853.10.

In Paris, the CAC 40 index fell 25.61, or 0.59%, to 4,291.06.

Aegon N.V fell 10.2% to €4.34 after the Dutch insurer posted a disappointing first-quarter profit due to volatile financial markets.

Adjusted profit before tax, excluding exceptional items, was €462 million, compared with €432 million a year earlier.

Quarterly net profit tumbled 51% to €143 million from the same period a year ago.

Credit Agricole SA sank 5.1% to €8.64 after the French bank’s financial results came below expectations due to debt restructuring and the planned sale of its 25% stake in the group’s regional banks.

Quarterly net profit plummeted 71% to €227 million, while revenue dropped 13% to €3.8 billion.

Without the impact of the sale and one-time items, Crédit Agricole’s net profit fell 9% to €394 million.

KBC Group NV jumped 5.3% to 48.08 after the Belgian bank posted a declining, but better-than-expected, quarterly net profit.

First-quarter net profit dropped to €392 million from €510 million in the first-quarter of 2015 due to pressure from low interest rates.

The result, however, was ahead of expectations of €304 million on rising customer deposits, loans and insurance income.

RWE AG soared 8.3% to €12.39 after the German utility reported first-quarter operating profit increased 7% to €1.75 billion, ahead of expectation of €1.44 billion.

Adjusted after-tax profit was €857 million, down 2% from a year ago, compared to an expected drop of 32%.

Net profit was €879 million, down from €2.17 billion in the same period last year, due to weak power prices and difficult comparison with 2015, when asset sales boosted earnings.

RWE is still negotiating with government its contribution to the state nuclear waste fund. The company also warned that its conventional power generation business faces difficult conditions.

The energy provider confirmed its outlook for the year of operating profit of €2.8 billion to €3.1 billion and adjusted after-tax profit of €500 million to €700 million.

Zalando SE erased 4.2% to €28.51 as the German online fashion retailer reported a 30% drop in first-quarter profit due to investments in technology.

The company announced the acquisition of Tradebyte Software GmbH for an undisclosed amount. The acquisition is related to the digitalization of Zalando’s warehouses.

Zurich Insurance climbed 6.9% to 231.30 Swiss francs despite a 28% drop in first-quarter profit and a 6% decline in total business volume.

Net profit for the March quarter fell to $875 million from $1.22 billion in the same period last year. Total group business volumes fell to $17.6 billion from $18.7 billion.