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Europe stocks fall to 10-wk low on Wall St loss

Europe stocks fall to 10-wk low on Wall St loss
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First Published: Wed, Jul 08 2009. 02 56 PM IST
Updated: Wed, Jul 08 2009. 02 56 PM IST
Paris: European shares fell in early trade on Wednesday, mirroring big losses on Wall Street and losing ground for the fifth straight session, as investors braced for the start of the corporate earnings season.
Oil firms were among the biggest losers, falling along with crude prices on growing doubts over the health of the global economy. Royal Dutch Shell was down 0.8% and Total down 1%.
Banks were also losing ground, with Banco Santander down 1.7%, Barclays down 1.9% and UniCredit down 2%.
At 3:00pm, the FTSEurofirst 300 index of top European shares was down 0.5% at 821.99 points, after falling to a 10-week low of 820.01 earlier. The fifth consecutive drop also marked the index’s longest losing streak since mid-January.
“The downward trend is set to continue for a while,” said Alexandre Le Drogoff, analyst at Aurel BGC.
“We might get a small rebound at some point, but there will still be room on the downside, and you can expect a typical sector rotation in favour of the defensives as risk appetite drops.”
After reaching a record low in early March, the pan-European index surged 38% during the spring. But the sharp rally stalled last month and stocks have given up some of their gains on rekindled concerns about the economic recovery and corporate results, with the FTSEurofirst 300 down 7.7% since 10 June.
Aluminium major Alcoa is due to kick off the second quarter corporate earnings season later on Wednesday.
Shares of mining and steel companies - recently hit by worries that earnings might not justify valuations after the sector’s sharp jump during the spring rally -- were mixed on Wednesday, with Rio Tinto up 1.6%, Xstrata down 0.9% and ArcelorMittal down 1.3%.
The sector, which plummeted 65 percent in 2008, is up 29% this year, making it the best performing in Europe.
But with mounting doubts over the prospect of a quick economic recovery, investors’ focus is turning to sectors seen as more defensive, such as health care, telecoms and utilities.
“Over the last four weeks we have seen the greatest level of buying in telecoms, which has also been the best performing sector over this period,” UBS strategist Nick Nelson wrote in a note.
On Wednesday, telecom group Vodafone was up 0.7%, drugmaker GlaxoSmithKline put on 0.4 percent and Italy’s utility Enel was up 1.1%.
Also on the upside, German chipmaker Infineon surged 7.7% after the company said late on Tuesday it would sell its wireline communication unit (WLC) to a US investor for €250 million.
“Post this transaction, (the company’s) net debt position will come down to only €75 million, according to our (estimates), with gross cash going up to €1.1 billion,” Credit Suisse analysts said in a note.
Around Europe, UK’s FTSE 100 index was down 0.3%, Germany’s DAX index slipped 0.3%, and France’s CAC 40 eased 0.7%.
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First Published: Wed, Jul 08 2009. 02 56 PM IST
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