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European Factors to Watch - Overbought stocks set for lower start
October 23, 2013 / 5:38 AM / 4 years ago

European Factors to Watch - Overbought stocks set for lower start

By Francesco Canepa
    LONDON, Oct 23 (Reuters) - European stocks were seen snapping their nine-day
winning streak on Wednesday as traders booked profits on "overbought" indexes
and corporate updates from blue-chip stocks provided a sobering picture.
    Brewer Heineken reduced its full-year profit guidance due to a
drop in sales in certain regions and Spanish power firm Iberdrola cut
the price of its scrip dividend.  
    At 0618 GMT, futures for the Euro STOXX 50, Britain's FTSE 100
, Germany's DAX and for France's CAC were between 0.3
percent and 0.5 percent lower.
    European equities rose to a fresh five-year high on Tuesday in a broad-based
rally after a weak U.S. jobs report boosted expectations that the Federal
Reserve would keep monetary policy ultra-loose for longer.
    The euro zone Euro STOXX 50 index is at its most "overbought"
since 2006 based on its 14-day wilder smoothing Relative Strength Index, which
hit 73 points on Tuesday.
    A reading above 70 indicates "overbought" conditions and the Euro STOXX 50
fell each time its RSI came close to 73 over the past seven years. Germany's Dax
was also in "overbought" territory using the same indicator.
    The longer-term technical picture, however, remained positive after the Euro
STOXX 50 broke above a broadening channel that had trapped it since the start of
the year and was supported by a rising 50-day moving average, according to
Philippe Delabarre, an analyst at technical analysis firm Trading Central.
    "As long as 2,850 is a support threshold, corresponding to the index's
former tops in May and August 2013, we can expect to reach the 2011 top at
3,077, then 3,275 (an intermediary resistance from 2008) and even 3450, which is
the overlap between March and August 2008," Delabarre said.
    The broader STOXX Europe 600 index was trading at 13.3 times its
expected earnings for the next 12 months, a premium to its 10-year average at
12, Thomson Reuters Datastream data showed.
    European shares were also taking their cue from a selloff in Asia, where 
Chinese shares surrendered early gains as profit taking accelerated on the
year's outperformers and fresh concerns about liquidity sent money rates higher.
 
    Michael Hewson, chief market analyst at CMC Markets, also cited a media
report that Chinese banks have tripled debt write-offs in the first half of this
year as a reason fuelling the sell-off.     
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 MARKET SNAPSHOT AT 0630 GMT                              
                                           LAST  PCT CHG   NET CHG
 S&P 500                               1,754.67   0.57 %     10.01
 NIKKEI                               14,426.05  -1.95 %    -287.2
 MSCI ASIA EX-JP                         557.25  -0.37 %     -2.06
 EUR/USD                                 1.3765  -0.11 %   -0.0015
 USD/JPY                                  97.38  -0.76 %   -0.7500
 10-YR US TSY YLD                         2.500       --     -0.01
 10-YR BUND YLD                           1.787       --     -0.01
 SPOT GOLD                            $1,335.91  -0.31 %    -$4.13
 US CRUDE                                $97.78  -0.53 %     -0.52
  
  > Asia shares pare gains, dollar pressured after US jobs data 
  > Wall Street rises as jobs data supports Fed policy          
  > Nikkei turns lower as yen's rise hits exporters             
  > U.S. bond yields hit 3-month lows as jobs data disappoint   
  > Dollar hits fresh lows as jobs data cements stimulus hopes  
  > Gold near 4-week highs on hopes U.S. will keep stimulus     
  > London copper eases from near one-month top                 
  > Brent slips below $110, but supported by weak dollar        
    
    COMPANY NEWS
    
    HEINEKEN 
    The world's third largest brewer, reduced its full-year profit guidance on
Wednesday after beer sales in eastern European dropped sharply and slipped in
Brazil and some African countries. 
    
    IBERDROLA 
    The Spanish power firm said on Wednesday it would buy back the next scrip
dividend at 0.125 euros per share, down 10 percent from a year ago.
 
    
    STMICROELECTRONICS NV 
    The chip-maker posted a quarterly net loss after demand weakened from Asian
smartphone and electronics makers, as Europe's largest maker of semiconductors
grappled with strong competition in the mobile market. 
    
    NORDEA 
    The Nordic region's biggest bank by value posted a rise in third-quarter
profit that was roughly in line with market expectations, and said its credit
quality continued to improve.
    Operating profit for the period was 1.02 billion euros ($1.4 billion)
compared with a mean forecast for 1.05 billion seen in a Reuters poll of
analysts and a year-ago 910 million.
   For more on the company, double click 
            
    HANDELSBANKEN 
    The Swedish bank posted a slightly bigger than expected rise in
third-quarter operating profit as commission income and loan losses came in
better than forecast. Operating profits reached 4.57 billion crowns ($717.26
million) versus a mean forecast for 4.53 billion seen in a Reuters poll of
analysts. 
    
    STATOIL 
    The Norwegian oil firm's gas output will be cut by 24.7 million cubic metres
(mcm) per day on Wednesday due to unexpected outage, the company said on its
website late Tuesday.

    NORSK HYDRO 
    The Norwegian aluminium maker said its July-September core earnings rose
more than expected thanks to solid performance at its primary aluminium and
power production divisions. 
   The Norwegian firm's underlying operating profit came in at 659 million
Norwegian crowns against expectations for 306 million crowns on average in a
Reuters poll.
    
     PSA PEUGEOT CITROEN 
    The carmaker said its alliance with General Motors may be scaled
back, as the troubled French carmaker posted a 3.7 percent quarterly revenue
decline. 
    
    ORANGE 
    The telecom group posted in-line third-quarter results and confirmed its
annual targets, even as sales in its key home market slid amid tough competition
with low-cost mobile rival Iliad. 
        
    FAURECIA 
    Faurecia, the French auto parts maker owned by PSA Peugeot Citroen, said
revenue rose 0.8 percent in the third quarter as currency effects curbed sales
growth. 
    
    TOTAL 
    The French oil major has resumed exploring for oil and gas in Uganda's lake
Albert region, more than a month after the discovery of unexploded ordinance led
it to suspend operations. 
    
    AIR FRANCE 
    Franco-Dutch airline Air France-KLM plans to raise seating capacity by 2.5
percent for its winter schedule as it bets on higher demand for long-haul
travel, especially on African and South American routes. 
    
    RSA INSURANCE 
    The insurer rose on Tuesday amid talk that European insurance giants
Generali and Zurich were casting their eye over the firm,
which could lead to a near 7 billion pounds approach, according to various
newspaper market reports.

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