European shares pause on earnings concerns

European shares lacked the momentum to extend a rally to multi-year highs on Tuesday, a mixed outlook for corporate earnings underlined by downbeat signals from Remy Cointreau and Hugo Boss.

Shares in Remy dropped 7.5 percent after the French spirits group warned of a double-digit decline in full-year operating profit because of a slowdown in China.

Subdued demand from China also hit performance at the German fashion house, shares falling 3.5 percent after it delayed its 2015 profit target.

Investors had been expecting earnings to pick up this year as the European and global ecomomy improves, but so far this has not happened and momentum – analyst upgrades minus downgrades – remains mired in negative territory.

“European equities are beginning to be a little bit stretched based on the fact that earnings expectations have not completely reversed … You are seeing the forward (price-to-earnings) multiple rising, but the forward expectations for earnings are actually flat and that’s not normally a very healthy sign,” said Peter Garnry, strategist at Saxo Bank.

Read the whole article at Reuters here.

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