European shares fall on China data, ECB warning

European shares fall on China data, ECB warning

European Central Bank comment about the impact on the euro and the region’s banks of involving bondholders in euro zone bailouts also hit sentiment.

The ECB said forcing private bondholders to accept losses on euro zone sovereign debt could damage the currency’s reputation.

“It is not really new, but it highlights the divergences between governments and the ECB that may hold up bank recapitalisation plans," a Paris-based trader said.

At 5:05pm, the FTSEurofirst 300 index of top European shares was down 1% at 967.03 points, following a 12 percent rise in a week.

The index inched higher earlier in the session but ran into strong resistance at 983.4 points, which represents the mid-point of the nosedive from late-July to late-September.

Cyclical shares such as heavyweight miners dropped, with Xstrata down 4.3% and Antofagasta down 4.9 percent after data showed China’s trade surplus narrowed for a second straight month in September with both imports and exports lower than expected.


Investors’ focus was also on the results of Italy’s debt auction, at which the yield on the 5-year BTP bonds fell to 5.32% from 5.6% a month ago, but it failed to reassure investors over the country’s finances.

French banks, among the biggest holders of Italian debt, were taking a hit, with BNP Paribas down 7.7% and Societe Generale down 4.7%, while Italian lender UniCredit fell 5.5%.

Adding to the jitters on French banking stocks, a French finance ministry source told Reuters that France believes losses for private investors in Greek debt in a second financing package for Athens will be above the 21% initially agreed.

“It’s all about investors’ psychology and not facts at the moment. The excessive euphoria in the past week’s rally is similar to the excessive panic during the summer," said David Thebault, head of quantitative sales trading at Global Equities in Paris.

“At this point, we have taken profits off the table, and we play very short-term moves using leveraged equity options, but that’s it for now. We should get better entry points for stocks later on," he said.

The euro zone’s blue chip Euro STOXX 50 index was down 1.4% at 2,338.29 points, after briefly crossing above the 50% retracement of the slump of the past few months, a key resistance level.

The index, in a downward mood since the first quarter, was also testing the 38.2% Fibonacci retracement of the fall from the year’s high in mid-February, a longer-term resistance level.

“The pros and cons of the immediate pursuit of the recent trend are fairly balanced. We have no ‘sell´ signal, but the resistance reached are important levels," said Valerie Gastaldy, head of Paris-based technical analysis firm Day By Day.

Around Europe, the UK’s FTSE 100 index was down 0.9%, Germany’s DAX index down 1.2%, and France’s CAC 40 down 1.1%.

Italian utility major Enel fell 3.3% on fears over the group’s dividend after Chief Executive Fulvio Conti told Bloomberg in an interview that its dividend was under review because of a one-off tax.

A spokesman for the company said the dividend policy remained unchanged, though the full-year dividend could be affected by the one-off energy tax introduced earlier this year.

“This is a big reminder that dividends in the sector are under increasing pressure. Better switch to telcos if you want to play the dividend theme," a Paris-based trader said.

E.ON was down 3.4% and EDF down 1.1%.

Bucking the trend, telecom gear maker Alcatel-Lucent surged 10%, with traders citing short covering after the Financial Times said the company will sell its Genesys Laboratories unit, which makes equipment for the call center business, for $1.5 billion.