London: European shares fell on Thursday, taking their cue from poor overnight showings by Wall Street and Asia after minutes of the US Federal Reserve’s June meeting dampened hopes for more risk-asset-boosting stimulus in the near term.
The FTSEurofirst 300 was off 0.4% at 1,034.82 by 1:55pm, having closed flat on Wednesday.
The Fed minutes showed the world’s biggest economy would have to worsen before the central bank eased monetary policy further. A few officials thought more stimulus was justified, but the majority were unconvinced.
“It doesn’t change my overall view that QE3 is going to happen later this year or the beginning of next year. But in the short term this was a disappointment,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
“There is not much to expect from economic data, there is not much to expect from earnings, so the only thing markets hope for is more quantitative easing, more stimulus from Europe - more stimulus from everywhere.”
In a broad-based fall, basic resources came under pressure, down 1.2%, as the copper price dipped on the back of the Fed minutes, and ahead of China GDP data, set for release on Friday.
Sentiment was also hurt by anxiety about US earnings, centring around the technology and industrial sectors, with a warning on third-quarter revenue from network gear maker Adtran Inc the latest worrying signal from the US corporate sector overnight.
This came on the heels of weak forecasts from chipmakers Applied Materials Inc and Advanced Micro Devices , and a sales warning from engine maker Cummins Inc .
European technology stocks came under pressure on Thursday, shedding 1.7%, making them the hardest hit sector.
“Profit warnings continue to come through in most sectors and most countries. The market believes that the central banks and European governments will be able to get their act together. I would say that is a pretty optimistic stance,” said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.
Henk Potts, market strategist at Barclays, however, underlined that while quarterly earnings are very volatile, full-year earnings estimates remain positive in the euro zone and at close to 8% in the United States.
“It’s worth remembering that earnings revisions are already more than priced into valuations - I don’t necessarily see it as being disastrous by any means,” he said.