London: European shares were lower in early trade on Wednesday, weighed by banks and commodities, with investors cautious ahead of a summit of G-20 leaders in London.
By 2pm, the pan-European FTSEurofirst 300 index of top shares was down 1.1% at 725.46 points, following a 3.5% rise in the previous session.
“Investors are looking at the G-20 for any commitment... like government expenditure, or more importantly, getting the banking system working properly so that there is more lending,” said Justin Urquhart Stewart, director at Seven Investment Management.
“Everyone is on egg shells waiting to see what happens with G20. Everything ... is now predicated on what comes out of G-20,” he said.
Banking stocks weighed heavily on the index, although stocks within the sector were mixed. Societe Generale lost 4.3% after the French bank said on Tuesday it expects additional writedowns of risky assets in the first quarter “at (a) manageable level”.
Lloyds Banking Group, HSBC, Banco Santander were down 1.7-6.5%.
“Banks were firmer yesterday for no obvious reason other than the fact they were retracing some of the pronounced weakness of the previous day. So banks to be down this morning is not a surprise,” said Bernard McAlinden, strategist at NCB Stockbrokers.
However, Swiss bank giant UBS gained 0.7% after the group said it had appointed former Credit Suisse executive Ulrich Koerner as its new chief operating officer.
Energy stocks fell as crude lost 2.8%, BG Group, BP, Royal Dutch Shell and Total were down 2.4-3.1%. Goldman Sachs cut BP to “sell” from “neutral”.
Miners were in the doldrums as copper slipped 2.2%. Anglo American lost 6.8% after the group said on Tuesday it had sent out a request for proposals to banks for a loan of about $2 billion, three banking sources close to the deal said.
Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, and Rio Tinto were 3.5-5.5% lower.
Lafarge was down 4.4% after the world’s biggest cement maker launched a €1.5 billion rights issue at a subscription price of €16.65, compared with Tuesday’s closing price of €33.89.
On the upside, Vodafone gained 2.3% and Telecom Italia rose 2% after Goldman Sachs raised both groups to “buy” from “neutral”. The broker also added the UK mobile operator to its “conviction buy list”.
Vienna Insurance Group was 4.5% higher after the group said it plans to pay a surprise bonus dividend, as well as its regular payout, after reporting a 24% rise in 2008 profit, boosted by growing premium income in emerging Europe.
In economic news, the pace of decline in euro zone factory activity eased slightly in March, buoyed by signs of stabilisation in France and Germany, but firms shed jobs at record speed, a survey showed.
Later in the session, investors will look closely at U.S. Manufacturing PMI data, due today.
“The main thing today is the US Manufacturing PMI, not that manufacturing is key to the U.S. economy but it has more implications for sentiment,” added NCB’s McAlinden.
Across Europe, the FTSE 100 index was down 1.8%, Germany’s DAX was 1.7% lower and France’s CAC 40 slipped 1.9%.