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Market Update

Gloomier Outlook Drags European Markets

Author: Nigel Thomas
Last Update: 12:18 PM ET November 09 2015

4:00 PM Frankfurt – European burses declined today on a gloomier outlook for the global economy, political uncertainty in Portugal and disappointment over mergers. Continental’s sales and profit surged, but missed expectations. Lonmin net loss widened and plans a rights issue at 94% discount.

In the absence of major earnings reports on Monday, investors focused on the outlook for the global economy and news about merger & acquisition.

All the main European markets traded in red territory.

The Organization for Economic Co-operation and Development, or OECD, decreased its global economic forecasts for the second time in three months due to slower growth not only in emerging markets, but also in developed countries like Germany and Japan.

World output is now forecast to grow 2.9% in 2015 and 3.3% in 2016, down from the September estimates of 3% and 3.6%, respectively.

In Europe, growth is expected to slow down to 1.5% in 2015 and to 1.8% in 2016.

The decline in Portuguese shares was most pronounced due to political turmoil. An agreement between leftist parties to establish an alternative government raised concerns among entrepreneurs that political instability would harm investments, financials, and job creation.

In London trading, FTSE 100 index slid 1.68 to 6,352.15, while in Frankfurt the DAX index fell 42.53 or 0.4% to 10,946.95.

In Paris, CAC 40 index slipped 26.27 or 0.5% to 4,958.35.

Among the gainers, ArcelorMittal SA rebounded 4.8% to €5.24 from the losses it incurred last week, after the Luxembourg-based steel and mining company reported disappointing results, cut its guidance, and suspended dividend payment due to weak demand and competition from China.

Continental AG declined 5.1% to €212.65 after the Germany-based tire manufacturer missed earnings expectations, although it raised its annual outlook.

The auto parts maker reported sales in the nine-month period ending in September soared 14% to €29.22 billion.

Net profit surged 16% from a year ago to €2.08 billion and diluted earnings per share jumped to €10.42 from €8.99.

The company’s automotive group sales increased 8.8% to €17.6 billion, while sales in rubber group segment reached €11.7 billion.

Continental forecasted net sales for the year to increase to more than €39 billion.

In the UK, InterContinental Hotel Group PLC was among the biggest losers, down 3.5% to 2,677 pence, as the hotel chains operator said that it wasn’t considering a potential sale or merger of the company.

Last week the hotel group denied the rumors that it was exploring its options for a merger.

Lonmin Plc surged 10.4% to 17.94 pence after the platinum producer announced rights issue of 27 million new shares at 1 pence each, which represents a discount of 94% from Friday's trading price of 16.25 pence.

Amid declining commodity prices, the miner reported revenues for the year ending in September soared 34% from a year ago to $1.29 billion.

Net loss widened to $1.66 billion compared to $188 million a year ago and diluted loss per share increased to 285.5 cents form 33 cents.

Germany controlled airline Lufthansa dropped 1.2% to €13.78 euro after the strikes canceled about 1,000 flights, affecting more than 100,000 passengers.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc