European shares fell in morning trading on Monday in a broad-based pullback led by declines in Fiat Chrysler after deteriorating health forced its CEO to quit, while a disappointing earnings update sent Ryanair sharply lower.
The STOXX 600 was down 0.2 percent by 0827 GMT, on track for its third straight day of losses as worries over trade tensions lingered following Washington’s threat last week to slap tariffs on $500 billion of Chinese imports.
Most sectors were trading in negative territory, though defensives like telecoms and utilities, whose domestic exposure shields them from trade jitters, outperformed.
Fiat Chrysler (FCA) and Ferrari both slumped as much as 5 percent after CEO Sergio Marchionne fell seriously ill following complications from surgery, prompting an early change at the helm of both companies.
Jeep division head Mike Manley was named on Saturday to succeed Marchionne, one of the auto industry’s most tenacious and respected auto chiefs, as CEO of Fiat Chrysler.
“Sergio’s dealmaking and political skills will be missed as FCA faces trade/tariff uncertainty, some labour unrest in Italy and a constantly shifting landscape in Latin America,” Barclays analysts led by Brian Johnson wrote.
“We nevertheless believe that the investment case for margin expansion and eventual strategic options remains intact,” they added. Fiat pared some losses and was down 1.8 percent, while Ferrari was 3 percent lower.
Ryanair declined 5.6 percent to lead losers on the STOXX.
The Irish carrier said average fares would be lower than expected during its key summer period due to high competition, unusually hot weather in Northern Europe and uncertainty caused by a series of strikes.
“Some sense from reading these results that the expected dent to the low-cost model from unionisation etc is already feeding through to the bottom line, although it may be unwise to read too much into a single quarter’s numbers,” said Markets.com analyst Neil Wilson.
“We note that full-year profit guidance remains unchanged… although this remains on the whims of French air traffic controllers, its own staff talks, Brexit and close-in Q2 fares,” he added.
Julius Baer and Philips also fell after results.
Despite Monday’s disappointments and broader caution that any trade war escalation could slow global growth, analysts are upbeat about earnings growth in Europe, having been revising upwards their estimates over the past few weeks.
According to Thomson Reuters I/B/E/S data, second quarter earnings for the STOXX are seen up 6.7 percent.
UniCredit rose 1.4 percent in relief after news that the European Banking Authority rejected a request to look into complex financial instruments that a UK hedge fund says are wrongly included in the Italian bank’s capital.
