EUROPE MARKETS: European Stocks Waver As Euro Rallies; Suez Tanks After Profit Warning

By Sara Sjolin, MarketWatchFeaturesDow Jones Newswires

Euro jumps to 3-year high against dollar

European stocks swung between small gains and losses on Wednesday, with utility companies leading decliners after a profit warning from Suez SA.

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Exporters were also squeezed by a rally in the euro, which jumped to a fresh three-year high against the dollar after U.S. Treasury Secretary Steven Mnuchin cheered the recent slide in the greenback.

What are markets doing?

The Stoxx Europe 600 index was slightly lower at 402.78, after rising for a fourth straight session on Tuesday and scoring its highest close since August 2015.

Germany's DAX 30 index fell 0.1% to 13,554.43, losing a grip on its record close from Tuesday. France's CAC 40 index dropped 0.1% to 5,531.21, while the U.K.'s FTSE 100 index lost 0.3% to 7,708.30 (http://www.marketwatch.com/story/ftse-100-slides-to-6-day-low-as-pound-breaks-above-140-2018-01-24).

The euro climbed to $1.2345 from $1.2298 late Tuesday in New York. The pound jumped to $1.4100 from $1.4000 on Tuesday.

What's driving the market?

The benchmark European index struggled for direction as traders weighed up strong economic data against a rallying euro and a profit warning from French utility major Suez.

The flash purchasing managers' indexes for the eurozone painted a surprisingly strong picture of the region in January, with the composite reading climbing to 58.6 from 58.1 in December. Analysts had expected a pullback to 58.0. The January reading signals growth at the fastest rate since June 2006, along with the largest payroll gain since 2000.

Higher wages are likely to push up inflation and strengthen the case for the European Central Bank to end its aggressive asset purchase program and start hiking interest rates. The euro has risen recently on expectations the ECB will turn more hawkish and end its QE program for good in September. Traders are eager to get more hints on the future of monetary policy at the ECB's meeting on Thursday.

Read:5 key question for the ECB as hawkish noises start to emerge (http://www.marketwatch.com/story/5-key-question-for-the-ecb-as-hawkish-noises-start-to-emerge-2018-01-23)

The euro and pound were also boosted by comments from U.S. Treasury Secretary Mnuchin (http://www.marketwatch.com/story/dollar-plunges-to-3-year-low-after-mnuchin-cheers-weaker-greenback-2018-01-24) that he isn't too worried about the recent dollar slide. Speaking at the World Economic Forum in Davos, he said a weaker greenback "is good for us as it related to trade and opportunities," breaking with the usual U.S. strong dollar policy.

What are strategists saying?

"Europe's de facto benchmark was slipping after the one of the first major profit warnings of Europe's earnings season, from French conglomerate/utility Suez. That stemmed modestly positive stock sentiment from earlier in the session," said Ken Odeluga, market analyst at City Index, in a note.

"The balance of corporate results will almost inevitably be positive during the earnings season though. Switzerland's Novartis's was an example on Wednesday, raising profit guidance after beating consensus," he added.

Which stocks are in focus?

Suez SA (SEV.FR) tanked 16%, on track for its biggest one-day percentage loss ever after the French water utility cut its 2017 earnings target, partly due to political turmoil in Catalonia in Spain.

The profit warning also served as a timely reminder of the challenges facing the industry, sending shares of other utility companies lower too. Veolia Environnement SA (VIE.FR) lost 3.6% even after the company confirmed its profit guidance (http://www.marketwatch.com/story/veolia-confirms-guidance-after-suez-profit-warning-2018-01-24).

Novartis AG (NOVN.EB) (NOVN.EB) rose 2.9% after the Swiss drugmaker said its fourth-quarter profit was boosted by strong sales of newer drugs (http://www.marketwatch.com/story/strong-sales-of-newer-drugs-boost-novartis-results-2018-01-24).

Sage Group PLC (SGE.LN) slumped 6.7% after a strong rise in sales still missed analyst forecasts (http://www.marketwatch.com/story/sage-group-backs-guidance-after-revenue-rises-63-2018-01-24).

(END) Dow Jones Newswires

January 24, 2018 06:26 ET (11:26 GMT)