European shares snap winning run as earnings disappoint

LONDON, Feb 13 (Reuters): European stocks snapped a week-long winning streak on Thursday, weighed down by a batch of disappointing updates from blue-chip companies including Swiss food group Nestle and French bank BNP Paribas.
Shares in Nestle fell 1.4 per cent after it said it may undershoot its long-term growth targets again this year due to weaker demand from emerging markets (EM) and price pressures in Europe.
French spirits group Pernod Ricard also warned about weak demand in China on Thursday as it cut its annual profit growth goal.
An MSCI basket of stocks with the highest proportion of sales from emerging countries has fallen by more than two per cent this year, underperforming the broader market, as signs of a slowdown in China and capital flight from other emerging countries saw traders ditch assets linked to those regions.
"Our view is that there will be some further disappointment from companies exposed to emerging markets in the fourth quarter (2013). Difficult to assess, however, what is now included in share prices as this thematic is very well known" Yann Belvisi, a strategist at CM-CIC Securities in Paris said.
"Consensus is becoming very bearish on these stocks but we don't expect EM economies to bottom too low, so opportunities should materialize later in the year. For the moment we still recommend that  investors favour exposure to both US and European economic growth."
The pan-European FTSEurofirst 300 index was down 0.2 per cent at 1,323.86 points at 0858 GMT, falling for the first time in seven sessions. The Euro STOXX 50 index was down 0.3 per cent at 3,085.30.
Britain's Rolls Royce, the world's second-largest aircraft engine maker, was the top faller on the FTSEurofirst 300, down 11.4 per cent, after it forecast declining defence aerospace and marine revenues in 2014.
Also weighing on the index were banks BNP Paribas and Banking Group, down 4.3 per cent and 3.7 per cent, respectively, after their quarterly updates.
BNP Paribas reported a 76-per cent drop in quarterly profit after booking a $1.1 billion litigation provision, triggering a downgrade to "hold" from "accumulate" at CM-CIC Securities.
Bucking the sector trend was Germany Commerzbank, which rose 3.1 per cent after posting a small profit in the fourth quarter of 2013 and showing its restructuring had gained traction.
"The earnings flow today is mixed, and we see a couple of big names being impacted by the crisis in the emerging markets, so even if the overall picture is relatively positive, investors have to be selective," a Paris-based trader said.
Nearly halfway through Europe's earnings season, 58 per cent of European companies have met or beaten quarterly profit forecasts, their best score since the third quarter of 2012, according to Thomson Reuters StarMine data.
In absolute terms, however, the data shows profits are down 3.5 per cent compared to the same quarter a year before.