European stocks flat after poor US tech results

July 20, 2013 - 3:06:03 am

LONDON: European shares were mostly unchanged yesterday with investors digesting disappointing results from Google and Microsoft and hints of financial reform in China.

At close, London’s FTSE 100 index of leading shares slipped 0.06 percent to end at 6,630.67 points.

Frankfurt’s DAX 30 retreated 0.07 percent to 8,331.57 points and in Paris the CAC 40 dipped 0.06 percent to 3,925.32 points.

Wall Street fell in midday trade yesterday with the Dow Jones Industrial Average down 0.18 percent, and the tech heavy Nasdaq off 1.20 percent.

“An altogether more repressed sentiment prevails today, as disappointing earnings from the global technology sector threaten to take the wind out of the stock market sails,” said market strategist Brenda Kelly at trading firm IG.

Traders also weighed news that China’s central bank will lift controls on lending interest rates, a sign that authorities may be embarking on some form of financial liberalisation economists say is urgently needed.

Mark Williams, chief Asia economist at Capital Economics, called the change a “significant development for China’s financial sector”.

Moody’s meanwhile raised its outlook for the US economy, just as Detroit became the biggest city in US history to file for bankruptcy protection after decades of decline and mismanagement.

“The outlook hike for the US from Moody’s credit rating agency, and new highs in the Dow Jones Industrial Index coinciding with the declared bankruptcy of the City of Detroit, serve to remind us of the fragility of the American recovery,” noted Kelly.

After the US close on Thursday, Internet search giant Google revealed that its second-quarter profit rose 16 percent to $3.23bn from a year ago, but its results fell far short of market expectations.

The results were released at the same time fellow tech giant Microsoft also released results shy of expectations, sending its shares tumbling. “The technology sector appears to be suffering from a mix of problems such as faltering demand ... and a shift away from PC to mobile/tablet,” said ETX Capital analyst Ishaq Siddiqi.

“Indeed, Google and Microsoft missed expectations due to those issues and have now joined Intel, SAP, Yahoo and Oracle in the list of ugly tech earnings.”

In Paris, shares in diversified media group Vivendi gained 2.00 percent to ¤15.52 after a press report that it had rejected an offer of $8.5bn for its subsidiary Universal Music. And advertising group Publicis lost 1.67 percent to ¤58.80 after the announcement of a partnership with AOL.

Asian shares mostly fell, with profit-takers moving in at the end of a positive week, while dealers in Japan keep an eye on weekend parliamentary elections.

In foreign exchange market activity on Friday, the European single currency rose to $1.3141 from $1.3108 late in New York on Thursday. The dollar fell to 100.35 yen compared to 100.47, while sterling rose to $1.5250 from $1.5220.

On the London Bullion Market, the price of gold slid to $1,295.75 an ounce from $1,283.25 on Thursday.