Defense giant Renk shares dip despite order boom; Burberry soars 16%: Live updates

Hello from the markets team in sunny London. It’s been a mixed morning for European equities, with the regional Stoxx 600 mainly trading lower and hovering just below the flatline in the early afternoon — threatening a four-session run in the green.

— Jenni Reid

Shares of French train manufacturer Alstom plunged 17%, putting it at the bottom of the Stoxx 600 index by midday in London, as investors parsed its full-year results.

Sales rose 6.6% year-on-year to 18.5 billion euros ($20.8 billion) on an organic basis, with the growth rate forecast to cool to between 3% and 5% in the coming fiscal year.

The adjusted earnings before interest and tax (EBIT) margin increased to 6.4% from 5.7% while free cash flow (FCF), a longstanding issue for the firm, came in at 502 million euros, slightly ahead of both guidance and market expectations.

“While we see order levels down [year-on-year], we expect commentary on the pipeline to remain robust,” Citi analysts said in a note.

“We recently downgraded our rating to neutral, and see the larger catalyst event to be when the current planning horizon completes in [full year] 27, with the potential for higher margins and further improved FCF conversion beyond that point.”

— Jenni Reid

CNBC’s Karen Gilchrist reports that any business turnaround at Burberry — which is targeting cost savings of £60 million ($79.9 million) — will take time to bear fruit.

Jefferies analysts said the “brand’s turn-around case is in slow-burn mode,” with limited innovation potential as it refocuses on classic pieces like its trench coat.

Yanmei Tang, analyst at Third Bridge, noted that such an item “naturally limits the frequency of repeat purchases.”

Alexander Sagel, head of German defense manufacturer Renk, told CNBC’s Annette Weisbach that the NATO summit due to run from the June 24 to June 25 will be key for the industry to get a firm view of government spending commitments.

As well as the broad announcement of higher defense targets from governments, Sagel said he expected Germany to increase its spending as a proportion of GDP to 3% or 3.5%, from current levels near 2%.

“I think also what we will get from the NATO summit are clear, key requirements to each of the European NATO users. So what I expect to get, or what we as Germany, is a clear number of how many brigades, how many tanks, etc, etc, what kind of platforms need to be invested in the next 10 years,” he said.

In parallel, the company will be monitoring the formation of the new German government, Sagel continued, meaning “major decisions to be expected, and a more clear view on potential projects and upsides for Renk” in the third and fourth quarter.

Renk on Wednesday reported a 15% year-on-year revenue increase to 273 million euros ($306.7 million) for the first quarter, just shy of market expectations. Shares were up 0.27% at 9:45 a.m. in London.

— Jenni Reid

• U.S. President Donald Trump hails his return to Saudi Arabia where he has secured hundreds of billions of dollars of investment from the kingdom. He will be heading to Qatar later today.
• The U.S. Agriculture Secretary, Brooke Rollins, says Trump’s global trade negotiations will be a boon to the whole world.
• German shipping giant Hapag-Lloyd confirms its full-year outlook despite trade concerns on the horizon.
• And defense firm Renk doubles its quarterly orderbook, seeing intakes of 550 million euros ($618.2 million.)

Listen below or find “Squawk Box Europe Express” wherever you get your podcasts.

The euro gained 0.5% against the U.S. dollar by 9:49 a.m. in London to trade at around $1.124.

Catherine L Mann, an external member of the Bank of England’s Monetary Policy Committee, told CNBC’s “Squawk Box Europe” on Wednesday she had advocated for a 50-basis-point cut in February as she anticipated a “non-linear change in the labor market that would be deleterious for growth and consumption.”

“And that that would lead to … reduction of pricing power of firms, and so that cascade from a very weak labor market into lower inflation was what I saw in the cards,” Mann said.  

The central bank cut rates by 25 basis points in February.

Mann was then one of two members of the MPC who voted to hold rates steady at its most recent meeting last week. The central bank instead reduced its key interest rate by 25 basis points again, bringing it down to 4.25%.

“So where are we now, or where was I in the last decision? The first observation is that the labor market has been more resilient,” Mann told CNBC. “Yes, we’ve had some prints that are indicative of the slowing labor market, but it is not a non-linear adjustment. Number two, and actually much more important, our household expectations have increased both at the one-year mark and the five-year mark. I worry about that. Plus goods, price inflation has increased. PMIs for input and output prices has increased.”

“And so that cascade from labor market weakness to pricing weakness did not happen,” she added. “The market’s given me 75 basis points. I only asked for 50.”

— Chloe Taylor

Good morning from the Queen Elizabeth II Centre in central London.

Stocks are on the breakfast menu this morning for the fund managers attending the London Value Investor Conference.

I’ll be bringing live updates this morning as some of the biggest investors pitch their stock ideas on stage. Simon Adler, portfolio manager of Schroders’ Global Recovery, Global Income and Global Sustainable Value strategies, is performing the opening act. Alex Roepers, chief investment officer of Atlantic Investment Management, will be pitching four stock ideas later in the day, I’m told.

And Charles Heenan, investment director at Kennox Asset Management, has traveled down from Edinburgh to present his ideas to the conference.

— Ganesh Rao

It’s 8:41 a.m. in London, and regional stocks are slightly lower following mixed trade immediately after the opening bell.

The Stoxx Europe 600 index is down by 0.1%, inching lower from a 0.1% rise. Sectors and major bourses are currently in mixed territory, with France’s CAC 40 leading losses on a drop of around 0.4%.

— Chloe Taylor

London-listed shares of Burberry were 9.1% higher at 8:27 a.m. in London, after the company announced new steps in a restructuring plan and said its earnings fell less than expected in the three months to March.

The company said its organizational changes could lead to job cuts, with the strategy potentially affecting up to 1,700 jobs globally.

Read more here.

In corporate news, British luxury giant Burberry just announced a slew of organizational changes, as part of continued turnaround efforts at the embattled luxury house.

CNBC’s Karen Gilchrist is reporting on the measures, which were announced as the company’s quarterly earnings report showed sales fell less than expected in the three months to March.

If the Stoxx 600 dips into negative territory on Wednesday, it will put the index on track to snap its four-day winning streak.

Global stocks rallied earlier this week after the U.S. and China announced a 90-day pause on most of the tariffs they had slapped on each other’s goods in recent weeks. The Stoxx 600 gained 1.2% on Monday, after details on the deal were made public.

— Chloe Taylor

Holiday operator TUI Group missed top line expectations owing to a shift in Easter holidays to the third financial quarter.

The company said revenues were “modestly” higher by 1.5% to 3.7 billion euros ($4.14 billion) for its third financial quarter ending March 31, missing analyst expectations of 3.86 billion euros. It also reported an adjusted loss of 207 million euros, better than the expected 226.1 million loss.

However, TUI maintained its full-year revenue guidance, adding that total sales were expected to rise between 5% and 10%.

“We expect a small positive reaction as the strong profitability and continued [average sale price] growth for summer bookings offsets the deceleration in booking volumes – even with the Easter impact,” said Citi’s equity analyst Leo Carrington in a note to clients. “With the company reiterating its [2025 financial year] guidance, we don’t expect material changes to consensus estimates at this stage.”

— Ganesh Rao

CNBC’s Holly Ellyatt reported this morning that British businesses are concerned about a labor shortage arising from U.K. government plans to tighten immigration policy.

The British government on Monday announced plans to cut migration to the U.K., tightening the rules on who can come to work, study and live in the country. The proposals raise English-language requirements for migrants, as well as the skills and level of education they need to obtain work visas. 

Read Holly’s story in full here.

Germany’s annual harmonized inflation rate stood at 2.2% in April, data from the country’s Federal Statistical Office showed on Wednesday.

The data release confirmed preliminary figures released at the end of last month.

— Chloe Taylor

Good morning from London.

European stock markets are expected to open lower, paring some of the gains seen earlier this week after the U.S. and China agreed to a trade truce.

Futures point to the Stoxx Europe 600, Germany’s DAX and the French CAC 40 all opening 0.2% lower, while the FTSE 100 is slated to shed 0.3%.

Investors are looking ahead to earnings updates from Burberry, TUI, Imperial Brands, Experian, Compass Group, Telefonica and EON.

— Chloe Taylor