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European shares give up gains after DAX touches new 2016 peak

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A display showing the German Stock Market Index DAX is pictured at the stock exchange in Frankfurt, Germany, on September 26, 2015, after shares in Deutsche Bank, Germany's biggest lender, hit a record low. Shares in Deutsche Bank, Germany's biggest lender, hit a record low on Monday after reports at the weekend that Berlin had refused state aid for the embattled lender. / AFP PHOTO / DANIEL ROLAND / “The erroneous mention[s] appearing in the metadata of this photo by DANIEL ROLAND has been modified in AFP systems in the following manner: [-A display showing the German Stock Market Index DAX is pictured at the stock exchange in Frankfurt, Germany, on September 26, 2016.--] instead of [-A display showing the German Stock Market Index DAX is pictured at the stock exchange in Frankfurt, Germany, on September 26, 2015.-]. Please immediately remove the erroneous mention[s] from all your online services and delete it (them) from your servers. If you have been authorized by AFP to distribute it (them) to third parties, please ensure that the same actions are carried out by them. Failure to promptly comply with these instructions will entail liability on your part for any continued or post notification usage. Therefore we thank you very much for all your attention and prompt action. We are sorry for the inconvenience this notification may cause and remain at your disposal for any further information you may require.”

A display showing the German Stock Market Index DAX is pictured at the stock exchange in Frankfurt, Germany, on September 26, 2015, after shares in Deutsche Bank, Germany’s biggest lender, hit a record low.

European shares turned lower after a strongly start on Tuesday, with Germany’s DAX briefly touching a new peak for 2016, after sentiment was knocked by mixed earnings on Wall Street and in Europe.

The pan-European STOXX 600 index ended down 0.4 per cent. Germany’s DAX ended flat after earlier touching a new peak for 2016 of 10,827.72 points.

The German stock market outperformed after Ifo data showed that German business morale had improved unexpectedly in October, suggesting company executives have become more optimistic about the growth prospects for Europe’s largest economy.

But other parts of the market were more volatile. Italy’s Banca Monte Paschi dei Siena ended 15 percent lower, having at one stage been 25 per cent higher, after it announced a new strategic plan.

In a major gamble by a new CEO appointed last month to save the world’s oldest bank, the lender said it would launch a debt-to-equity conversion and a capital increase, as well as lay off a 10th of its staff, shut branches and sell assets to win investor backing.

“We think that Monte dei Paschi’s 2016-19 strategic plan is doable but entails significant execution risk,” analysts at BBVA said in a note.

Top faller on the STOXX 600 was semi-conductors group AMS slumped by nearly 13 percent after it gave a weak Q4 outlook, while some analysts were cautious over AMS’ mid-term targets.

“The significantly weaker than expected guidance for Q4 2016, as well as the company’s volatile track record, are not supportive regarding investors’ confidence in reaching this ambitious medium term target, in our view,” said analysts at Baader Helvea.

Dassault Systemes and Finnish refiner Neste also fell after results, down 7 percent and 5.6 percent respectively.

European shares turned lower after a positive start, dropping along with U.S. stocks, which were also hindered by weaker earnings.

In Europe 40 per cent of companies have missed quarterly earnings expectations this season, Thomson Reuters Starmine data shows, compared to just 22 percent on the U.S. S&P 500

Among risers, UPM surged 10.8 per cent after the paper maker posted higher profits and flagged restructuring plans, while Luxottica climbed 4.4 percent after the Italian eyewear maker reported higher revenues and confirmed its 2016 outlook.

Diversified miner Anglo American also rose sharply after the company’s production update. It rose 4.5 per cent and helped to lift the European basic resources sector to its highest level since August 2015.


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