London: European shares were lower in early trade on Friday as investors awaited key US monthly jobs data, with banking shares the biggest losers after Royal Bank of Scotland posted a first-half loss.
By 2:16pm, the pan-European FTSEurofirst 300 index of top shares was down 0.9% at 929.79 points.
The FTSEurofirst 300 index of top European shares had surged 15% since 10 July, propelled by better-than-feared company results.
The index, which has gained 43% since reaching a floor in early March, is up around 11.6% so far in 2009.
Investors will closely study the US July employment report at 6:00pm, In a Reuters survey, economists forecast that 320,000 U.S. jobs were lost in July compared with a loss of 467,000 jobs in June, while the unemployment rate is seen at 9.6 percent, which would be the highest since June 1983.
“I think today the worry is bad news, recently the market has ignored bad news and risen anyway ... now more sensible heads will prevail,” said Mic Mills, senior trader at spread betters, ETX Capital.
Banking shares took the most points off the index. State-owned Royal Bank of Scotland slumped 15.8% after it posted a £1 billion ($1.7 billion) loss in the first-half of the year, hit by £7.5 billion of bad debts, and named a new finance director to boost turnaround efforts. HSBC, Lloyds Banking Group, Barclays and UniCredit were down 3 to 7.2%.
Insurers were also on the downside. Allianz shed 2.8% as it beat expectations with a 21% rise in second-quarter net profit, but forecast that business would remain challenging with lower expected returns.
“Generally, most companies tend to beat estimates, but expectations have been lowered so much it is not so difficult to beat these levels. Earnings are still down 30 something percent in the US and Europe, so it is not good,” said Philippe Gijsels, senior equity strategist at Fortis Bank.
“If you look at where the profits have come most of this has been through cost cutting. Revenues are still down year on year ... the market has been hoping final demand will pick up ... I do not think final demand will be there and eventually I think earnings will disappoint,” he said.
Miners were in the doldrums as copper slipped 2%. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were down 2.5 to 7.2%.
Looking at individual stocks, PSA Peugeot Citroen fell 4.7% after Standard & Poor’s on Thursday cut its ratings into junk territory, citing an expectation that low demand will hurt the French automaker’s already weak profitability.
Shares in Belgium’s Umicore slumped 10.1% after the metals group reported a sharp drop in first-half profit and said it sees second-half recurring operating profit roughly the same as in the first half. Turning to the upside, defensive stocks were in favour. Telecom groups Vodafone, Telefonica, France Telecom and Deutsche Telekom were up 0.6 to 1.4%.