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UPDATE 2-Euro zone shares get PMI boost, Centrica sinks
November 23, 2017 / 10:26 AM / in 20 days

UPDATE 2-Euro zone shares get PMI boost, Centrica sinks

* STOXX 600 ends flat

* Euro zone blue-chips rise on strong PMIs

* Altice jumps on asset sale report

* Telecom Italia rises on network spin-off talk (Add closing prices)

By Helen Reid

LONDON, Nov 23 (Reuters) - The pan-European STOXX 600 index ended flat on Thursday, while euro zone blue chips erased early losses to trade up 0.3 percent after business surveys for the bloc cemented optimism on the economy.

Euro zone businesses boomed in November with flash composite, services and manufacturing PMIs beating all forecasts in Reuters polls.

“This supports our view that the economy is in a very healthy condition,” said Britta Weidenbach, head of European equities at Deutsche Asset Management.

Societe Generale strategists however warned “the euro zone recovery is now a well-known story”, and were less enthusiastic about the potential for equities in the new year, adding that a heavy political agenda in Europe could affect markets.

British stocks ended flat, as energy firm Centrica plummeted after results.

Centrica dropped 15.5 percent, its biggest daily drop ever, after it lost 823,000 or about 6 percent of its energy customers in four months and full-year earnings missed market estimates.

“The question now is whether this weakness will persist in to 2018, and the longer-term potential impact on the dividend,” said Morgan Stanley analysts.

Among the leading European gainers was Altice, jumping 3.9 percent after a report the debt-ridden French telecoms and cable group was looking to sell its telecoms network in the Dominican Republic.

Its shares are still down nearly 60 percent from the start of the year as funds sold out of the company’s U.S. unit.

“The shares have de-rated but we remain neutral given our continued concerns about the long-term impact from Altice’s strategy,” said Credit Suisse analysts, adding the company’s strategy shift and asset sales could however be an upside risk.

Thyssenkrupp reversed early losses to trade up 3.9 percent after demand for elevators helped boost its orders to a five-year high.

Telecom Italia shares rose 4.8 percent on speculation about a possible spin-off of its telephone network, and after the firm said it would work with Rome under special “golden powers” to protect it as a strategic asset.

“Ongoing discussions with Rome aimed at easing tensions are welcome,” said Mediobanca analysts in a note, adding: “Network separation with disposal of minority stake would be a value creative option.”

As the earnings season drew near its close, MSCI Europe earnings growth was tracking 10.1 percent in dollar terms while companies in the MSCI EMU enjoyed 11.1 percent earnings growth.

“The third quarter results season was exactly in line with our expectations, definitely supporting the view that the European equity market will show double-digit earnings growth this year in euro terms,” said Weidenbach.

“This is really the turnaround that we were awaiting – beforehand we had not seen earnings growth over five years.”

Analysts have been revising down earnings estimates for European companies this quarter. Deutsche’s Weidenbach put this down to the strengthening euro denting expectations for earnings from foreign-exposed companies especially in healthcare and consumer staples.

Reporting by Helen Reid and Danilo Masoni; Editing by Georgina Prodhan, Editing by Jeremy Gaunt

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