London: European shares fell on Monday, as miners were pressured by lingering worries over monetary tightening in top commodities consumer China, while uncertainty over banking reform in the United States hurt financials.
By 2:55pm, pan-European FTSEurofirst 300 index of top shares was down 0.5% at 1,054.10 points, retreating from a seven-week peak reached in the previous session.
Weakness in European equities mirrored falls in Chinese shares, which were hurt by concerns Beijing may continue to tighten liquidity to fight inflation, with the Chinese central bank seen raising banks’ reserve requirement ratios as early as this week.
Miners Anglo American, Kazakhmys, BHP Billiton, Xstrata and Rio Tinto lost 1 to 1.9%.
“There is some concern about what is going to happen in China. It looks as if... there will be policy tightening so therefore that will have an effect on commodity prices,” said Justin Urquhart Stewart, director at Seven Investment Management.
A currency spat between China and the United States also caused some jitters. Chinese Premier Wen Jiabao spurned foreign calls for the yuan to rise and said calls from the United States and other big economies for China to lift the value of its yuan currency were unhelpful, even protectionist.
Banks were also lower, on renewed concerns over banking reform in the United States after key Republicans said in a letter obtained by Reuters that a financial regulation reform bill could still be worked out in the Senate despite a recent breakdown in negotiations.
Barclays, Societe Generale, BNP Paribas and Deutsche Bank were off 0.8 to 1.6 %.
Investors will eye details to emerge from a euro zone meeting on Monday, where finance ministers hope to agree on a way to provide heavily indebted Greece with financial aid, despite French and German doubts that a deal will be reached.
The credit ratings of the United States, UK, France and Germany, the world’s four largest triple-A sovereign debt issuers, as well as Spain are safe but risks to their blue-chip status have grown, a report from Moody’s Investors Service said.
The main macro attention this week will be on the latest Federal Reserve Open Market Committee meeting, scheduled for Tuesday, following last month’s surprise quarter-point hike in the U.S. discount rate -- seen as the start of the Fed’s withdrawal of emergency support to the financial system.
However the majority of economists expect the Fed to make no changes to headline US monetary policy until the third-quarter at the earliest.
Economic data due for Monday include the New York Fed’s March Empire State Index at 1230 GMT and US February industrial output and capital utilization numbers at 1315 GMT. March’s National Association of Homebuilders index will be released at 1700 GMT, after European markets close.
On the upside, defensive pharmaceuticals gained ground. GlaxoSmithKline, Shire, Sanofi-Aventis and Novartis added 0.2 to 1%.
Among individual movers, BT Group gained 2.3% as Citigroup upped its rating for the telecoms operator to “buy” from “hold” with an increased target price, citing valuation grounds.
BSkyB fell 2.1%, reversing gains from the previous session, as Evolution Securities downgraded its recommendation for the broadcaster to “reduce” from “neutral”.