Europe Stocks Gyrate as Earnings Concerns Offset Rate Cuts

By Michael Patterson

Dec. 4 (Bloomberg) -- European stocks gyrated between gains and losses as concerns that more companies will reduce earnings forecasts offset interest-rate cuts to revive economic growth.

Royal Philips Electronics NV dropped 1.9 percent after the electronics maker said it won’t meet its target of doubling earnings by 2010. TNT NV lost 3.4 percent on a lower profit forecast for its express-delivery unit. ING Groep NV, the biggest Dutch financial-services provider, HBOS Plc of the U.K. and France’s Lafarge SA gained more than 3 percent after the European Central Bank and the Bank of England lowered rates.

Europe’s Dow Jones Stoxx 600 Index dropped 0.1 percent to 198.06 at 3:54 p.m. in London, recouping earlier losses of as much as 1.7 percent. The Stoxx 600 climbed from its lows of the day after ECB President Jean-Claude Trichet said it may be possible for the central bank to purchase financial assets to boost growth.

Central bankers “are recognizing that they’re making up for lost time,” Michael Dicks, head of research and investment strategy at Barclays Wealth, which oversees about $194 billion, said on Bloomberg Television in London. “Almost every day we’re seeing data that’s at a record low.”

The Bank of England cut its key rate by 1 percentage point to 2 percent, matching the median forecast of economists surveyed by Bloomberg. ECB policy makers lowered the benchmark lending rate by 75 basis points to 2.5 percent. Only 17 of 56 economists in a Bloomberg News survey correctly forecast the move, with 35 predicting a 50 basis-point cut and 4 calling for a full percentage-point reduction.

National Markets

National benchmarks advanced in 14 of the 18 western European markets. The FTSE 100 gained 0.4 percent, and France’s CAC 40 added 0.3 percent. Germany’s DAX increased 0.5 percent.

The MSCI World Index of equities in 23 developed countries has tumbled 46 percent in 2008 as the collapse of the U.S. mortgage market froze credit and pushed the U.S., Japan, the U.K. and Germany into recessions. Shares rebounded the past two weeks as central banks flooded the financial system with cash and governments injected fresh capital into banks.

Philips fell 1.9 percent to 12.95 euros today. Europe’s largest consumer-electronics company also said writedowns will lead to the first net loss since the start of 2003 this quarter. Philips will slash the value of stakes in companies including liquid-crystal display maker LG Display Co. and chipmaker NXP BV by 1.1 billion euros ($1.39 billion) this quarter.

TNT Drops

TNT declined 3.4 percent to 14.92 euros. Express division results “will be somewhat below” the company’s earlier outlook, Hoofddorp, Netherlands-based TNT said today in a statement.

Analysts have reduced earnings estimates this year. Profit for companies in the Stoxx 600 will slide 13 percent in 2008, compared with 11 percent growth forecast at the start of the year, according to estimates compiled by Bloomberg.

Since Oct. 7, quarterly earnings for the 331 companies in the Stoxx 600 that reported results declined 14 percent on average, trailing expectations by 6.2 percent, Bloomberg data show.

ING gained 6.4 percent to 6.445 euros. HBOS, the U.K. bank being bought by Lloyds TSB Group Plc, rallied 6.8 percent to 93 pence. Lafarge, the world’s biggest cement maker, rose 3.2 percent to 43.23 euros.

Credit Suisse Group AG said it will cut 5,300 jobs, or 11 percent of its workforce, after losses of 3 billion francs ($2.5 billion) in the first two months of this quarter. The reductions will be primarily in the investment bank and help save 2 billion francs in costs. The shares gained 7.9 percent to 29.9 francs.

Chief Executive Officer Brady Dougan said he foresees no circumstances under which state aid would be required for the bank.

Nokia Oyj climbed 3.2 percent to 10.94 euros. The world’s largest maker of mobile phones aims to win market share next year, saying reduced spending and a push in advanced handsets will help it as the industry shrinks.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.