Friday January 11, 12:47 PM
Paris shares down early afternoon; consumer stocks lead the way
PARIS (Thomson Financial) - Share prices were lower in early afternoon, with shares in consumer goods groups leading the way amid concerns about the impact of a US consumer spending slowdown and a wave of recommendation downgrades from major
brokerage houses.
At 1.15 pm CET the CAC-40 index was down 28.06 points or 0.52 pct at 5,372.37, while the SBF 120 was 19.81 or 0.51 pct lower at 3,852.34.
On the Matif, January CAC-40 futures were trading at 5,354.50, and the euro was quoted at 1.4773 usd compared to 1.4738 usd late yesterday.
Concerns over a slowdown in US consumer spending were exacerbated overnight by a series of gloomy comments from American Express Co. in its trading update.
The company said it will take a fourth-quarter pretax charge of about 440 mln usd, due to slower spending by card members and an increase in delinquencies and loan write-offs during December. In addition, Amex said it is taking a more cautious view of the business environment in 2008, in light of the weakening US economy, and expects card member spending to slow further.
The negative sentiment was heightened by a series of broker downgrades on European consumer stocks, combined with rumours of a possible profit-warning at Cadbury-Schweppes and a potential poor trading update from drinks manufacturer Diageo (LSE: DGEF.L - news) .
Morgan Stanley (SPU - news) downgraded Unilever NV to 'underweight' from 'equal-weight' and reduced its price target to 21 eur from 22 this morning, while Deutsche Bank (Xetra: 514000 - news) cut Clarins (Paris: FR0000130296 - news) and L'Oreal (Paris: FR0000120321 - news) to 'sell' from 'hold', suggesting earnings momentum among household and personal care stocks are close to peaking.
Meanwhile both Groupe Danone and L'Oreal were also cut to 'sell' from 'hold' at ABN Amro (Amsterdam: AABA.AS - news) , with the broker pointing to tough year-over-year comparisons for 2008, likely pressure on profit margins and volumes and high valuations.
In Paris, Danone (Paris: FR0000120644 - news) fell 1.81 eur or 3.01 pct to 58.38, extending yesterday's heavy losses which were sparked by an uninspiring trading update from Premier Foods (LSE: PFD.L - news) .
Cosmetics group L'Oreal shed 3.75 or 4.10 pct to 87.75, while mid-cap peer Clarins slumped 2.50 or 4.72 pct to 50.50.
Drinks manufacturers were under pressure throughout Europe, hit by the negative speculation surrounding Diageo.
'There are worries ahead of the trading update,' one trader said, noting Diageo is due to update the market on Feb 14. Another pointed to vague talk of a profit-warning at the drinks group.
Natixis Securities added further grist to the mill, warning investors to watch out for spirits in 2008, due to record high sector valuations and fears over the strength of US demand.
The broker pointed out that US growth has been a decisive factor for the industry over the past ten years, but that Diageo has just reported a weakening in demand.
In Paris, Pernod-Ricard was among the top fallers in the CAC-40, down 6.20 or 4.08 pct at 154.70. Outside the blue-chip index, Remy Cointreau (Paris: FR0000130395 - news) followed suit, giving up 1.66 or 3.64 pct to 43.90.
Elsewhere among consumer goods stocks, pen, lighter and razor maker Bic (Paris: FR0000120966 - news) fell 1.25 or 2.90 pct to 41.90 as several analysts issued estimates predicting the group's full-year sales figures next Wednesday will show weak growth.
Outside the consumer goods sectors, STMicroelectronics (Paris: NL0000226223 - news) was also hit by a broker downgrade, shedding 0.24 or 2.83 pct to 8.25.
In a note to clients, Credit Suisse cut its stance on the European semiconductor sector to 'marketweight' from 'overweight' and lowered its stance on shares in STMicro to 'neutral' from 'outperform' saying it believes the group's margins will suffer significantly from a weaker US dollar.
In the property sector, Klepierre (Paris: FR0000121964 - news) also fell sharply, dropping 1.94 or 5.96 pct to 30.59 pct, after a downgrade to 'neutral' from 'outperform' from Exane BNP Paribas.
On the upside, Alstom (Paris: FR0010220475 - news) climbed 4.98 or 4.08 pct to 127.01, helped by a recommendation upgrade from Goldman Sachs (NYSE: GS - news) and talk of a major contract to sell high speed trains to Italy.
In a note on the capital goods sector, the US broker upgraded ABB (Stockholm: ABB-U.ST - news) , Atlas Copco (Stockholm: ATCOB.ST - news) , Spirax-Sarco and Weir Group (LSE: WEIR.L - news) to 'buy' from 'neutral' and Alstom to 'neutral' from 'sell', reflecting its belief that the groups have higher than average emerging market exposure and defensive earnings.
Separately, the Financial Times claimed this morning that Alstom is poised to announce a deal worth some 700 mln eur, to sell 25 next generation AGV high-speed trains to an Italian group of industrialists.
'Alstom shares were penalised yesterday by vague rumours that the group could lose out on this contract ... so this is good news,' a local dealer said.
Peugeot (Paris: FR0000121501 - news) benefited from a broker upgrade, rising 1.09 or 2.32 pct to 48.05.
Lehman Brothers (NYSE: LEH - news) upgraded its recommendation on the carmaker to 'overweight' from 'equal-weight' and raised its price target to 73 pence from 67, saying the market should not underestimate CEO Streiff's ability to cut costs beyond the company's past performance and current consensus expectations.
Elsewhere among the risers, bank stocks performed strongly, spurred by heightened hopes of US rate cuts, following Fed chairman Ben Bernanke's speech yesterday.
Franco-Belgian bank Dexia (Brussels: DEXB.BR - news) added 0.50 or 2.80 pct to 18.36, BNP Paribas (Paris: FR0000131104 - news) rose 1.57 or 2.21 pct to 72.56 and Societe Generale (Paris: FR0000130809 - news) was up 1.87 or 1.96 pct to 97.12. Outside the CAC-40, Natixis (Paris: FR0000120685 - news) climbed 0.29 or 2.32 pct to 12.78.
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