May 23 (Reuters) – European shares fell on Tuesday on weak updates from Julius Baer and Vivendi, while resilient euro zone business growth in May bolstered the chances of an interest-rate hike by the European Central Bank.
The pan-European STOXX 600 index (.STOXX) slipped 0.3% as declines in luxury stocks offset gains in the battered real estate sector (.SX86P).
Julius Baer shares (BAER.S) slumped 7.6% and were set for their biggest percentage drop in more than three years as the Swiss bank’s assets under management and money inflows for the first four months of the year missed analysts’ estimates.
Vivendi (VIV.PA) fell 6.3% to the bottom of Paris’ benchmark CAC 40 index (.FCHI) on news that controlling shareholder Vincent Bollore sold shares in the French media group.
Adding to the pressure, the HCOB Purchasing Managers index (PMI) flash reading showed French business activity expanded at is slowest pace in four months in May. The CAC 40 (.FCHI) fell 0.8%, leading losses in regional markets across Europe.
The German DAX (.GDAXI), however, came off its lows and was last down 0.1% after surveys showed German business activity expanded for a fourth month running in May, driven by a services sector revival that more than offset a manufacturing decline.
“If you remove Germany from the equation, the numbers are probably not quite so rosy,” said Stuart Cole, chief macro economist at Equiti Group.
“But I expect the ‘hawks’ on the Governing Council will be satisfied that today’s readings suggest the messages being given out by the ECB, that a further tightening in policy is needed.”
Investors expect the ECB to raise borrowing costs twice more by the end of the summer – taking the rate it pays on bank deposits to 3.75% – before it starts cutting them next year.
The benchmark STOXX 600 ground to a more than one-year high last week and the German DAX hit records as upbeat earnings and signs of resilience in the euro zone economy offset concerns of a potential U.S. recession and debt deal standoff in Washington.
In the UK, BT Group (BT.L) slipped 0.4% higher as billionaire Patrick Drahi increased his stake in the telecoms group to 24.5%, but restated that he does not intend to make a full takeover.
Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips
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