Earnings in focus as European shares pause after Trump rally; Pearson dives

  • Reuters
  • Stock Market News
Earnings in focus as European shares pause after Trump rally; Pearson dives
Credit: © Reuters.

* Europe's STOXX inches up 0.2 pct after choppy day

* Pearson plunges after profit warning

* ASML surges to record high on net income beat

* Miners top gainers as copper steadies (Recasts, adds quotes and detail, updates prices)

By Danilo Masoni

MILAN, Jan 18 (Reuters) - European shares ended little changed on Wednesday with investors looking at corporate earnings for market direction as more doubts emerged that a rally triggered by Donald Trump's U.S. presidential election win would continue.

The STOXX 600 .STOXX edged 0.2 percent higher after a choppy session, while the UK's FTSE .FTSE added 0.4 percent, bouncing after posting its biggest one-day drop since June 2016 in the previous session on Brexit jitters. France's CAC .FCHI and Madrid's IBEX .IBEX both ended down slightly.

The pan-European index has gained nearly 10 percent over the last two months but has come off from its early January peak on concerns Trump may not fully deliver on his stimulus promises.

"The risk is that... (Trump's) early focus will be negative, focused more on tough trade politics, instead of the more market-positive tax cuts and infrastructure investments," Finnish investment company Evli said in a note.

It said, however, that it was overweight on equities ahead of a reporting season in Europe expected to reach double-digit earnings growth, driven by a rise in sales and margins.

But there were negative corporate surprises on Wednesday, with a profit warning at Pearson PSON.L causing a loss of nearly one-third in the market value of the British educational group.

The world's biggest education company cut its profit outlook for the next two years and said it would have to reset its 2017 dividend and sell assets to raise cash for investments in new technologies. argument has been, and remains, investors have no visibility on what this company looks like in five years," Gary Paulin, head of global equities at Northern Trust (NASDAQ: NTRS ) Capital Markets, said in a note.

Pearson's 29.1 percent share price drop - its biggest ever - caused the STOXX 600 media index .SXMP to fall 1.8 percent, making it the worst sectoral performer on the day.

Elsewhere, earnings showed a better picture.

ASML ASML.AS rose 6.7 percent to a record high after Europe's largest supplier to semiconductor manufacturers beat net income forecasts and said it had almost sold out of its newest, most expensive machines for 2017 and early 2018.

"A very strong set of result and guidance for 2017 in terms of... orders and customer demand," Morgan Stanley (NYSE: MS ) analysts said.

Fish farmer Marine Harvest MHG.OL rose 3.9 percent after its fourth quarter earnings beat forecasts. initially jumping on a good earnings update, Novozymes NZYMb.CO tuned lower to fall 4.7 percent after the Danish biotech company's management told a conference call that its 2017 guidance was "back-end loaded". telecoms company Inmarsat ISA.L was also under pressure, down 5.9 percent, after JPMorgan (NYSE: JPM ) cut its rating on the stock to "neutral" from "overweight".

"The near-term story seems clouded by ongoing legacy pressures, a slower than hoped ramp up in Aviation revenues and rising GX/aviation investment needs," JPMorgan said in a note.

Germany's Gerresheimer GXIG.DE rose 6.6 percent after Deutsche Bank (DE: DBKGn ) upgraded the drugs packaging firm to "buy". .SXPP were the biggest sectoral gainers, up 1.4 percent, as copper prices steadied after their biggest one-month drop in the previous session when Trump rattled investors by saying the dollar was too strong. in London-listed sector heavyweights Rio Tinto RIO.L and BHP BLT.L rose 2.6 and 1.4 percent respectively.

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