European shares hit reverse as Schaeffler slump drags down autos

* STOXX 600 down 0.8 pct

* Schaeffler drags autos after cutting profit guidance

* Stada drops after takeover offer falls apart

* Bankia to buy BMN, shares top gainers
(Adds quotes and detail, updates prices)

By Kit Rees

LONDON, June 27 (Reuters) – European shares fell on Tuesday
as a drop in auto stocks after Germany’s Schaeffler cut its
profit outlook and disappointment over a failed buyout of Stada
offset gains among basic resources firms and Spain’s Bankia.

The pan-European STOXX 600 index was down 0.8
percent, as were blue chips, while Germany’s DAX
was 0.8 percent weaker.

Autos were the biggest pain point in Europe, falling
1.7 percent after German auto parts supplier Schaeffler
slashed its profit guidance on growing price
pressures and high costs.

Schaeffler’s shares tumbled nearly 12 percent, while shares
in peer Continental dropped 3.4 percent.

“Schaeffler flagging increased pricing pressure will almost
definitely raise concerns across the supplier space,” analysts
at Jefferies said.

“Schaeffler’s profit warning will reignite the debate on the
resilience on supplier margins and organic growth (post pricing)
as we approach the ‘peak’ of the cycle,” Jefferies analysts
added.

German drugmaker Stada was another notable
faller, dropping 5 percent after private equity groups Bain
Capital and Cinven failed to win the required shareholder
acceptances to take over the firm. Stada’s shares have rallied
nearly 26 percent this year, boosted by buyout talks.

Spanish banks were a bright spot as investors cheered
Bankia’s move to buy smaller peer BMN in a deal worth
around $924 million, a further step in cleaning up Spain’s
beleaguered banking sector.

Bankia’s shares rose more than 3 percent. They helped
support Europe’s banking index which was flat after
gains on Monday sparked by a taxpayer-funded rescue of two
struggling Italian regional banks, which prompted a rally in
Italian banking stocks.

“Spain is still seen as the weak one in Europe, so if this
takes it a step away from further weakness then that’s certainly
a positive,” Mike van Dulken, head of research at Accendo
Markets, said.

“It’s probably a positive in the sense that it’s
consolidation, cleaning it up, simplifying it, but it relies on
how futures moves are made.”

Gains among mining firms Anglo American,
ArcelorMittal and Rio Tinto helped prop up the
basic resources sector, which gained 1.1 percent, the
only sector to make any headway. Britain’s commodities-heavy
FTSE 100 <.FTSE. index was down 0.4 percent.
(Reporting by Kit Rees, Editing by Vikram Subhedar and Susan
Fenton)

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