London: European shares slipped by midday on Wednesday, falling from a one-week high hit a day earlier and holding below a key resistance level, with oil majors pressured as crude prices dipped on an increase in US inventories.
By 4:30pm, the FTSEurofirst 300 index of top European shares was down 0.3% at 1,052.97 points, while the Euro STOXX 50 was down 0.4% at 2,727.01 points, retreating from the 50% Fibonacci retracement of a drop from an April high to a May low tested on Tuesday.
Oil majors were among the biggest sector drags, as crude prices slipped after a report showed a sharp drop in petroleum inventories in the United States.
Royal Dutch Shell, Total and Eni shed 0.8 to 0.9%.
BP shed 1.3%. After hitting a bottom in late June, the stock strongly recovered as the company made progress in plugging the leaking well in the Gulf of Mexico, but it has been retreating over the past two weeks on mounting concerns over legal risks related to the clean-up of the leak.
Volumes on the FTSEurofirst 300 were slim due to the holiday period, at just 20.1% of the average 90-day trading volume by midday.
“Many people simply don’t trust the market because of the absence of investors,” said Heino Ruland, strategist at Ruland Research in Frankfurt.
“Investors don’t believe that the market is going to make a new high this year... because of the fear of a double dip in the United States and people are very cautious.”
Across Europe, Britain’s FTSE 100 index, Germany’s DAX index and France’s CAC 40 lost 0.1 to 0.6 %.
Among individual stocks, Vestas Wind slumped 20.4% after the world’s biggest wind turbine maker posted a surprise second-quarter loss and cut its 2010 earnings outlook.
However, fellow Danish company Danske Bank rose 3.4% after BofA Merrill Lynch upgraded its recommendation on the Nordic bank to “buy” from “neutral”.
Other gainers included Legal & General, which rose 3.1% as traders cited market talk of bid interest from Zurich Financial.
Mining stocks also lost ground on Wednesday, trimming strong gains made over the past four sessions. Kazakmys, Vedanta Resources and Rio Tinto lost 0.7 to 1.1%.
BHP Billiton shed 1.5%. The global miner went hostile on Wednesday with its $38.6 billion takeover bid for Canadian fertiliser group Potash Corp.
But the massive bid unveiled on Tuesday -- coming in the wake of Sanofi-Aventis’s $20 billion offer for US biotech firm Genzyme -- has raised hopes that a wave of M&A deals could revive investors’ appetite for equities and lift stock indexes out of the summer doldrums.
“Many market pundits had been looking for the next catalysts, perhaps this move from BHP will be the trigger for a raft of M&A activity over the remainder of the year,” Ben Potter, analyst at IG Markets, wrote in a note.