Frankfurt: European stocks dipped early on Tuesday, weighed down by commodity shares and breaking a three-day winning streak after euro zone and UK macro data showed job losses and higher inflation.
At 3:35pm, the pan-European FTSEurofirst 300 index was down 0.1% at 738.76 points. The index is down about 11% this year, but has recovered about 14.8% since falling to a record low on 9 March.
Commodity shares tracked weakness in oil and metal prices.
Anglo American, Rio Tinto and BHP Billiton were all down 4.5 to 5.9% as copper fell more than 2%, while Royal Dutch Shell fell 2.3%.
On Monday, the US government offered incentives for private investors to help free banks of up to $1 trillion in toxic assets, helping shares to a massive recovery.
However in Europe banks gave up early gains, with Credit Suisse down 2.6% after it said it would ask shareholders for the option to raise equity capital. HSBC fell 6% on worries about Asian growth.
“This is a positive flickering but for me nothing has fundamentally changed. Economic data remains grim,” said Hans-Juergen Delp, equity market strategist at Commerzbank in Frankfurt.
British consumer price inflation rose unexpectedly to 3.2% in February, while key figures from euro zone services and manufacturing activity showed the economy’s contraction eased a bit, while companies continue to slash jobs.
Across Europe, the FTSE 100 index was down 1.2% Germany’s DAX was up 0.1% and France’s CAC 40 lost 0.2%.
Analysts sounded a cautionary note on the US plan.
“It is every policy maker’s dream that the private sector will realise that assets are mis-priced and pour in capital to correct such a mis-pricing,” Credit Suisse said in a global equity strategy note on Geithner’s plan.
“In reality, the private sector is shell-shocked, ultra cautious and at the very least such an allocation of capital will take some time to implement,” Credit Suisse said.
Shares in Metro dropped 3.7% after the world’s fourth-largest retailer reported fourth-quarter results that met analysts’ forecasts, but said it saw 2009 sales falling significantly short of its medium-term goal.
“The 2008 numbers were solid, but the missing outlook for 2009 is making the waters murky,” says LBBW analyst Bernd Muell.