London: European shares snapped a five-day winning streak in early trade on Tuesday as news Alcoa is to slash its dividend weighed on miners, oils tracked crude lower and investors took profits in banks.
By 0938 GMT (15:08pm), the pan-European FTSEurofirst 300 index of top shares was down 1.1% at 713.34 points, following a 2.7% rise in the previous session.
Banking stocks were one of the worst performers. American Express said that US credit card delinquencies rose to 8.7% in February from 8.3% in January, while a rise in the default rate at Citigroup to 9.33% in February from 6.95% a month earlier disappointed analysts.
BNP Paribas, Credit Suisse and Banco Santander were down 1.2-2.8%.
Analysts said investors were booking gains after a 4.5% gain in the DJ STOXX European banks index over the past week.
“Some profit taking in the financials following on from the news by American Express about arrears on its credit cards,” said Jim Wood-Smith, head of research at Williams de Broe.
“It has just been taken as an excuse to bank profits after the rises we have seen in the last few sessions as the news shouldn’t have come as a surprise.”
Mining stocks fell after Alcoa said it would slash its dividend, issue stock and convertible notes worth about $1.1 billion and trim its 2010 spending to help weather the steep downturn in aluminum demand.
The stock was down 12% in Frankfurt. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were 1.9-5.4% lower, also depressed by a 1% fall in copper futures.
Energy stocks were lower as crude fell below $47 a barrel. Royal Dutch Shell lost 3.1% after it said it was under investigation by US authorities for potential breaches of overseas bribery rules.
BG Group, BP and Total were down 0.9-1.2%.
One of the few sectors not in the red was non-life insurers. A senior EU lawmaker said the European Union is close to a deal on rules obliging insurers to set aside enough capital to cover risks on their books, easing industry worries that the process would drag on for months.
Swiss Re gained 3.3% after it said it should be able to generate enough funds to buy back convertible bonds issued to Warren Buffett’s Berkshire Hathaway.
Generali was up 1.3%.
Later in the session, investors will be looking at US data on housing starts in February, as well US monthly producer price data and Germany’s ZEW economic sentiment index.
A two-day US Federal Reserve meeting starting later in the day will also be in focus.
“What is interesting in the US housing data is there have actually been continuing signs of further mortgage applications which is encouraging. I hope to see these figures a bit more positive. But with PPI I expect it to be weaker and German ZEW is likely to continue to be poor,” said Stewart.
Across Europe, the FTSE 100 index was down 0.8%, Germany’s DAX was down 0.8% and France’s CAC 40 was 1.4% lower.