European shares fall after Fed fails to impress

European shares fall after Fed fails to impress

London: European shares fell early on Wednesday after the US Federal Reserve’s measures to put economic recovery back on track failed to impress investors.

At 0831 GMT, the FTSEurofirst 300 index of top European shares was down 0.9% at 1,052.83 points, after falling 0.8% in the previous session.

The European benchmark is still up more than 63% from its lifetime low of 9 March 2009, partly due to stimulus measures worldwide.

“The Fed fell between two stools," said Jeremy Batstone-Carr, strategist at Charles Stanley in London.

“It was probably a reflection of divided perceptions on the outlook. The Fed has done little more in terms of action other than the gentlest of nudges on the tiller. The markets have chosen to focus on the Fed’s concerns about growth."

The US central bank said on Tuesday it would reinvest the money from maturing mortgage bonds it holds into government debt to counter recent signs of economic weakness. It left interest rates near zero and renewed its pledge to keep them low for an extended period.

The heavyweight banking sector was among the fallers in a broad market decline, with BBVA, Credit Agricole, Lloyds, Deutsche Bank and Societe Generale down between 1.8% and 2.3%.

Miners fell as the price of copper and other metals fell given the dollar’s rise against most currencies. Eurasian Natural Resources Corp, Kazakhmys Vedanta and Xstrata fell between 2.7% and 3%.

Anglo American fell 2.1% after Morgan Stanley downgraded it to “equal-weight" from “overweight".

German government bonds rallied, pushing the 10-year yield to an all-time low, with the Fed’s assessment of the recovery boosting appetite for safer assets.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC40 fell between 1.1% and 1.3%.

ING rises

Some companies bucked the trend with upbeat statements. ING Groep rose 2.1% after posting second-quarter profit at the top end of expectations on strength in its retail banking business and saying it still planned to sell its insurance business.

But Standard Life fell 3.6% as Panmure Gordon cut its rating to “hold" from “buy", even after the insurer posted higher interim profits.

The Euro STOXX 50 index of blue chips in the euro zone fell 0.9% to 2,774.30 points. The next key support level is at 2,737.62, the 50% retracement of the slide from the April high to the May low.

In other macroeconomic news, growth in Chinese investment and factory output slowed further last month as the government brought credit growth back to normal after a record lending spree in 2009 to counter the global financial crisis.