October 28, 2016 / 4:16 PM / 2 years ago

European shares back in the red for October on weak results

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* Pan-European STOXX 600 index ends down 0.3 pct

* STOXX ends month lower, banks outperform

* Novo Nordisk and Gemalto slump after results

By Atul Prakash

LONDON, Oct 28 (Reuters) - Weak corporate results weighed on European shares on Friday, while choppy trading in banking shares took away some of the sector’s recent gains.

Earnings disappointments from the likes of Novo Nordisk soured the mood, with the stock down 15 percent, the worst performance across the STOXX 600 on the day.

Investors have shown little tolerance for earnings disappointments in recent weeks, with shares of firms missing estimates or warning on profits getting punished severely.

Concerns over the outlook for regional companies have led to a record 38 straight weeks of outflows from European equity funds, the latest data from Bank of America Merrill Lynch and fund tracker EPFR showed.

Banks, among the most beaten down sectors in Europe this year, have offered some support to regional markets this week following a strong set of results from bellwethers which included a surprise profit at Deutsche Bank.

Financials are the best performing sector in Europe this month and are no longer the year’s worst performers having overtaken telecoms during the past week’s rally.

BNP rose 0.9 percent after the French bank said it was planning more cost savings to offset the squeeze on revenue from low interest rates, and may consider raising the proportion of earnings it pays out in dividends.

“Bank have been doing well on positive earnings, and on the fact that higher bond yields, and especially a steeper yield curve, are helpful for the sector,” said Philippe Gijsels, head of research at BNP Paribas Fortis.

“If these trends continue, the banking sector should continue to outperform,” BNP’s Gijsels said.

However, euro zone government bond yields seesawed on Friday as investors grappled with various economic data and what they may spell for inflation expectations and the future direction of central bank policy.

In a sign that longer-term concerns about the sector remain, shares of RBS, up as much as 3.5 percent at the open, reversed course to end down 1.2 percent after analysts raised doubts about the sustainability of its profits.

European banks are still down 16 percent this year.

Elsewhere, shares in digital security firm Gemalto fell 7 percent after a worse-than-expected outlook for 2017, while Spanish sausage case maker Viscofan’s shares dropped 3.3 percent following lower profits.

Satellite firm Eutelsat rose 7.3 percent after results that showed a steady start to the year.

Overall, third quarter earnings for STOXX 600 companies are expected to contract 9.9 percent, according to data from Thomson Reuters I/B/E/S. (Additional reporting by Danilo Masoni; Editing by Vikram Subhedar and Robin Pomeroy)

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