London: European equities retreated from a three-month peak in early trade on Tuesday as investors took profits from the previous session’s sharp bounce, while a fall in key base metals prices dragged down mining stocks.
At 0830 GMT, the FTSEurofirst 300 index of top European shares was down 0.3% at 1,067.91 points after falling to a low of 1,065.44 earlier in the session. The index surged 2.6% on Monday to hit a three-month closing high.
Losses, however, were capped as more company results surprised investors on the positive side, raising optimism for a strong earnings season. The market awaited more macro-economic numbers this week for near-term direction.
“We will remain extremely data-sensitive. The US non-farm payrolls figures this Friday certainly are the big events for this week,” said Keith Bowman, equity analyst at Hargreaves Lansdown.
“Earnings have been broadly positive. Companies seem to be cautiously optimistic going forward and we certainly see the level of cash held by corporations improving dramatically.”
German luxury carmaker BMW jumped 4.6% after the company said profitability at its core automotive division soared in the second quarter, thanks to rising volumes and better pricing.
Europe’s biggest mail and express delivery company, Deutsche Post DHL, rose 3.2% after it raised its 2010 outlook..
Miners were among the top decliners, as prices of key base metals slipped. BHP Billiton, Anglo American and Rio Tinto fell 0.6 to 0.8%.
But mining group Xstrata was up 0.3%. The company said it would pump over $5 billion into new mines and keep targeting organic growth rather than acquisitions, after more than doubling first-half earnings per share.
Investors awaited US pending homes sales data for June, due at 1400 GMT, and weekly retail sales numbers, due at 1255 GMT, for near-term market direction.
“If this week’s economic figures point towards a recovery in consumer spending, then maybe the market is going to go higher,” said Koen De Leus, economist at KBC Securities.
“In the short term, the market is going to be supported by very good results. But after that, I suspect macro-economic data is going to take over and, in my view, the numbers are going to disappoint.”
The Euro STOXX 50, the euro zone’s blue chip index, fell 0.2% to 2,817.13 points. It climbed 2.9% in the previous session and closed above its 200-day moving average and a 61.8% Fibonacci retracement of its fall from a high in April to a low in May.
The index hovered slightly above the retracement level of 2,806 and the moving average of 2,798.46 and a failure to hold the levels could trigger further sell-offs in the near term.
On the downside, the index could find strong support at around 2,586 points -- a low level hit in July.
Financials also fell, with the STOXX Europe 600 banking index falling 0.7%. HSBC, Lloyds and Societe Generale fell 1.1 to 2.5%.
Among individual shares, BP was down 0.5%. It is still hoping to attempt the first of two operations to permanently plug its ruptured Gulf of Mexico well on Tuesday despite the technical delay of a crucial test.
Optimism about the planned “static kill,” which will involve the injection of drilling mud into the top of the well, helped fuel a rally in BP and other energy shares on Monday despite reports that US regulators are investigating insider trading in the British energy giant’s stock.
Across Europe, the FTSE 100 fell 0.6%, Germany’s DAX was flat and France’s CAC 40 was down 0.3%.