Europe slides on Ericsson slump, souring bank mood

* STOXX 600 down 1.1 pct

* Ericsson sinks more than 16 pct after forecast cut

* Bank index slips most in 2 months as U.S. lenders drop

* IG Group enjoys double-digit gains

* Slower sales growth sends Zalando down 7 pct

By Helen Reid

LONDON, July 18 (Reuters) – European shares fell on Tuesday
after disappointing Ericsson and Lufthansa earnings, while
scaled-back expectations of monetary tightening by major central
banks dented financial stocks.

The pan-European STOXX 600 fell by more than 1
percent, snapping a four-day winning streak, with European banks
down by 1.6 percent and lower bond trading revenue at
Goldman Sachs adding to the selling pressure.

Barclays and Deutsche Bank, which are
also major players in the bond market, were top fallers on their
respective indexes after the Goldman results.

Although euro zone banks are the most favoured sector along
with tech among global investors, according to the latest Bank
of America Merrill Lynch (BAML) survey of fund managers,
comments from Federal Reserve and European Central Bank
policymakers have triggered profit-taking in recent weeks.

The comments point to a slower rate of tightening on both
sides of the Atlantic than many investors were expecting.

“The persistent overweight in Eurozone vs US equities could
be more bad news for European investors,” strategists at BAML
said, as that could leave them more vulnerable.

Elsewhere, Ericsson fell by nearly 16 percent
after cutting its forecast for the mobile infrastructure market
and reporting a wider than expected loss, a further blow to a
company that is undertaking cost cuts.

Nokia fell 3.3 percent to the bottom of the CAC
40 as the Finnish mobile equipment maker’s stock suffered too.

Zalando weighed on the retail index with
its shares down 8.3 percent after reporting slowing sales
growth. Europe’s biggest online-only fashion retailer said
capacity issues at new warehouses had held it back.

The broader euro zone earnings picture is expected to weaken
slightly in the third quarter, with analysts expecting a
stronger currency to weighing on the bloc’s large exporters.

“Historically euro weakness has provided a driver for
earnings beats and with that removed, expectations may be more
difficult to surpass,” Edward Park, investment director at
Brooks Macdonald, said.

German airline Lufthansa fell 1.2 percent from
10-year highs, the worst DAX performer, as cautious second-half
comments overshadowed a profit forecast hike.

Lufthansa’s shares had gained nearly 70 percent this year to
yesterday’s close, among the best performing stocks in Europe.

Norwegian fertiliser firm Yara fell 4 percent after
quarterly earnings were dented by a margin squeeze.

“We believe this has been Yara’s darkest quarter and see an
improving trend with urea prices ticking up in the U.S. and
Egypt recently,” Liberum analysts said.

Among shares boosting the index, British spread-betting firm
IG Group soared more than 16 percent, leading the
gainers after beating analysts’ profit estimates.

Property developer British Land jumped 3.1 percent
and was among the top performers on the STOXX 600 after
announcing a 300 million pound share buyback.

Analysts at Morgan Stanley last week predicted European
share buybacks would accelerate as corporates react to a better
economic growth and solid balance sheets.
(Reporting by Helen Reid; editing by John Stonestreet and
Alexander Smith)

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