Europe retreats as property stocks fall

Volkswagen, the German carmaker, shrugged off broader equity market losses on Tuesday after reporting strong full-year results.

VW jumped 8 per cent to €94.94 after beating market forecasts with a 52 per cent rise in operating profit last year, although its guidance for 2007 was limited to a forecast of further profit growth.

The FTSE Eurofirst 300 fell 0.3 per cent to 1,544.99 as property and oil companies declined.

Verbund lost 6 per cent to €34.34 after Austria’s biggest utility reported a 43 per cent rise in full-year net profit, although this was below market expectations as power prices eased in the fourth quarter.

The real estate sector weakened after the UK’s Land Securities said rising interest rates were cooling the market. After a strong run over the past two weeks, French group Unibail fell 1.3 per cent to €235.80 following a downgrade by Deutsche Bank from “buy” to “hold” on valuation grounds.

CRH rose 2.7 per cent to a record €34.05 as sentiment towards the Irish building materials group was boosted by the rich price paid ($4.6bn) by Vulcan Materials for Florida Rock Industries.

CRH has a significant US presence and ABN Amro said aggregates players were looking beyond short-term weakness in the US housing market and focusing on long-term scarcity value of reserves.

Continental rose 1.8 per cent to €101.05 after Citigroup raised its target price on the German tyremaker from €100 to €120 and reiterated a “buy” rating ahead of Thursday’s results when a large dividend increase is expected.

Linde of Germany added 1.6 per cent at €78.44 after selling its Mexican industrial and medical gases business to Praxair of the US for an undisclosed sum.

Carlsberg fell 6.7 per cent to DKr583 after its 2007 outlook disappointed. The Danish beermaker’s full-year earnings met expectations, but it cautioned that higher capital expenditure would have an impact on profit growth.

Grolschjumped 3.3 per cent to €32.94 as the Dutch brewer surprised with an extra dividend of €0.33 a share after reporting better-than-expected full-year profits.

Heineken fell 2.3 per cent to €39.36 ahead of its results on Wednesday. Belgium’s InBev firmed 0.5 per cent at €53.07, supported by ongoing speculation about a merger with US rival Anheuser-Busch.

Capitalia, the Italian bank, eased 0.6 per cent to €6.67 ahead of Thursday’s board meeting, which is expected to address the strategic rift between Matteo Arpe, chief executive, and Cesare Geron­zi, chairman.

Mr Geronzi is thought to favour a tie-in with Spain’s Santanderto help block the advances of Dutch rival ABN Amro, which is Capitalia’s biggest shareholder with an 8.6 per cent stake. But Mr Arpe appears to favour consolidation within Italy’s fragmented banking sector.

JPMorgan sounded a note of caution. “The probability of restructuring is low for the time being as management is still focused on completing the strategic plan, while the timing of potential M&A remains uncertain,” said Francesca Tondi. Santander firmed 0.3 per cent at €14.65, while ABN Amro shed 0.1 per cent to €25.92.

IWKA rose 4 per cent to €25.18 after UBS raised its price target on the German automation group from €24 to €30 and reiterated a “buy” recommendation.

Autostrade, Italy’s largest toll road operator, added 0.2 per cent to €22.63 amid hopes for a revival of a politically-blocked takeover by Abertis of Spain, up 0.2 per cent at €22.20, after Italy’s prime minister said talks with his Spanish counterpart were constructive.

Shares in Metrovacesa were suspended from trading after plans to split the Spanish property group in two were announced to resolve a long-running power struggle between its two largest shareholders.

The separation plan would involve its majority-owned division, Gecina in France, buying up most of Metrovacesa’s French assets. Metrovacesa said the split would value the company at €75.67 a share – nearly a 36 per cent discount to Monday’s closing price. Gecina would be valued at €129.36 a share – a discount of 9 per cent. Gecina shares were also suspended.

Oil companies eased as crude prices retreated, with France’s Total down 1.5 per cent to €52.78 and Norway’s Statoil off 1.6 per cent at NKr156.00.