Eurostocks: retailers, US results to set tone

16 Jan, 2005

British supermarket chain Tesco and Swiss drugs maker Novartis take top slots next week with two weeks to go before Europe's earnings season kicks off in earnest, while investors face a barrage of US results. Investors are eyeing US-exposed firms for the impact of the euro's strength against the dollar though recent euro weakness may soothe fears.
"You are already seeing a drip-feed of broker downgrades to earnings because of currencies," said Rita Dhut, head of European equities at Morley Fund Management.
"Markets are very worried about currencies, and companies exposed to the US like Heineken have been hit quite hard."
European stock indexes have come off 30-month highs struck on Monday on earnings warnings from the region's biggest chip maker Infineon of Germany and from Franco-Italian firm STMicroelectronics and as oil prices hit six-week highs.
"Markets are in a little bit of post-Christmas correction. People are worrying about oil prices moving up again," said Michael O'Sullivan, a strategist at State Street Global Advisors.
"We are still emphasising banks, telecoms and utilities, which are less exposed to currencies."
By 1045 GMT, the FTSEurofirst 300 index of pan-European blue-chips was 0.33 percent stronger at 1,045.9 points - below 1,058.3 points hit in the week. US light crude rose to $48 a barrel, driven by forecasts of a bout of cold weather in the US
Market favourite Tesco provides an update on Tuesday, and analysts expect the supermarket group to report a jump in sales as price cuts helped it extend its lead over rivals such as J. Sainsbury.
British music store group HMV issues first-half results on the same day. "Tesco continues to offer the best long-term growth story in the food retail sector and deservedly, and sustainably, trades at a valuation premium to its peers, in our opinion," said Nick Coulter, an analyst at Lehman Brothers.
Trading statements are due from UK chemist Boots and newsagent WH Smith on Wednesday, while Dutch supermarket company Laurus comes out with 2004 sales.
On Thursday, Swiss market leader Novartis kicks off the earnings parade for drug makers and will also provide an update on its drugs pipeline - a key focus for investors.
On the same day, Spanish bank Bankinter issues year results and British retailer Kesa gives a trading statement. French drinks maker Remy Cointreau also presents third-quarter sales, and fourth-quarter sales are due from French electrical equipment maker Schneider.
Swiss watch maker Richemont gives a third-quarter update on Friday.
The week starts off though with results from Dutch copier and print maker Oce on Monday and a trading statement from British plumbing supplier Wolseley.
European markets will take direction from the US earnings season which gets into full swing next week with a line-up of key companies reporting after a mixed start to the year so far.
Tech bellwether IBM and Internet media company Yahoo unveil fourth quarter numbers on Tuesday along with Bank of America.
Investors in auto makers such as Volkswagen will eye General Motor's scorecard on Wednesday, while JP Morgan Chase reports earnings.
On Thursday, scorecards are due from financial services giant Citigroup, auto parts supplier Delphi. Conglomerate General Electric reports earnings on Friday. US markets are shut on Monday for Martin Luther King Day.

Read Comments