Paris: European stocks inched higher on Wednesday morning after Chinese data boosted miners, eclipsing losses in consumer-related stocks on poor sales from French groups Carrefour and L’Oreal .
Gains were limited by simmering worries over the euro zone debt crisis after Moody’s downgraded Ireland’s credit rating to junk.
Tech shares took a beating, with Dutch chip equipment maker ASML falling 5.4% after saying consumer demand was slowing.
The FTSEurofirst 300 index of top European shares was up 0.04% at 1,092.09 by 0852 GMT. The index had lost nearly 3% over the past three sessions.
The euro zone’s blue-chip Euro STOXX 50 index, which ended at a seven-month closing low on Tuesday, was up 0.1% at 2,695.30.
“We are at a fork in the road. You can tell just by the massive volumes in futures. The Euro STOXX 50 is testing major support levels, and if it closes the week below 2,696 points, it could drop to May 2010 lows at 2,448.10 points,” said Lionel Jardin, head of institutional sales at Assya Capital, in Paris.
Mining shares gained ground, with Rio Tinto up 1.4% and Xstrata up 2.3%, rallying with metal prices after data showed China’s economy grew faster than expected in the second quarter, easing fears of a hard landing.
STAY AWAY FROM THE STOCK
Consumer-related shares took a hit, with Nestle down 0.9% and Henkel down 2%.
L’Oreal dropped 4.2% after the cosmetics group posted disappointing sales.
Carrefour fell 1.4%, extending recent sharp losses, after the retailer said it will struggle to meet 2011 goals for sales and profit growth, and confirmed a potentially lucrative merger deal in Brazil was off.
“This is clearly another profit warning, the second in one month. Stay away from the stock,” a Paris-based trader said.
Carrefour stock has plumetted 30% so far this year.
Around Europe, Britain’s FTSE 100 index was up 0.2%, Germany’s DAX index up 0.2%, and France’s CAC 40 dragged down 0.3% by L’Oreal and Carrefour.
Italy’s two biggest banks, UniCredit and Intesa Sanpaolo , gained 2.5% and 3.7% respectively, extending Tuesday’s rally seen by traders as short covering.
Italy’s market regulator has recommended stakeholders who have lent shares in Italian companies to retrieve them, Consob head said on Wednesday.
“Also, Italy’s budget manoeuvre should be voted by Saturday. All the shorts on financial stocks have been closed,” a Milan-based trader said.
The recent sharp pull-back on European shares has dragged valuation ratios to levels not seen since April 2009, according to Thomson Reuters Datastream.
Shares on the STOXX 600 trade at an average 9.96 times 12-month forward earnings, below a 10-year average of 13.35 and Wall Street’s S&P 500 average forward price-to-earnings ratio of 12.31.