London: European shares pared most of their early gains on Thursday after surveys showed manufacturing and business activity deteriorating in major economies, with sentiment staying fragile on concerns about Greece exiting the euro zone.
At 2:24pm, GMT, the FTSEurofirst 300 index of top European shares was up 0.1% at 973.08 points after rising to a high of 981.03 earlier in the session. The index slipped 2.2% in choppy trade on Wednesday.
Investors cut their exposure to riskier assets after surveys showed German business sentiment dropped for the first time in seven months in May, suggesting Europe’s top economy was no longer immune to the impact of the region’s deepening crisis.
French and German manufacturing sectors also shrank, at their fastest pace in three years, during the month.
“This might indicate that the cloud of uncertainty has begun to impact Germany as well. Investors are taking a cautionary stance and the market is likely to stay volatile,” Keith Bowman, equity analyst at Hargreaves Lansdown, said.
A summit of European Union leaders on Wednesday shed no new light on how they intended to tackle the debt crisis, giving the market little new to trade on.
“Long-term investors are absent and the market is currently being driven by traders who have a short-term investment horizon and are looking for bargains,” said Koen De Leus, strategist at KBC Securities, in Brussels.
“The market remains vulnerable as we still don’t have any concrete proposal on the table to resolve the debt crisis. People are looking for signs that politicians are going to act, but that feeling did not emerge from yesterday’s EU meeting.”
Sectors linked to economic growth were the worst hit, with European construction and materials shares falling 1.1% to feature as the top decliner. Auto shares fell 0.7%, while tech shares fell 0.4%.