A profit warning from
Charter, which on Wednesday received a preliminary £1.3bn approach from buyout firm Melrose, has seen its share price quadruple since 2008 and much was expected, so news of a slowdown at its welding business in Europe hurt badly and ultimately cost chief executive Michael Foster his job, which has now left it vulnerable to a takeover. Many of its peers have done similarly well. But a slump in UK manufacturing growth to a 20-month low in May hinted that this kind of performance was not sustainable. Indeed, recent data from Markit caused its chief economist Chris Williamson to call the loss of momentum over the past two months "worrying". And there's the promise of more to come as industrial data out of Europe looks likely to weaken over the coming months.
So, keep a close eye on second-quarter earnings updates from American and European players from the middle of next month, and from domestic peers when
Its stance on the sector is cut to 'neutral' from 'positive' in expectation that eurozone weakness will cause a global growth pause for four to six months. Companies with short order books and low visibility like Bodycote,
There's no arguing with the facts. Building exposure to the sector right now would be a bold move given the European economy is suffering a serious wobble. Any correction offers a chance to get some of the better quality manufacturers on the cheap, but share prices may now be supported in the short term by consolidation hopes.