European shares retreat; Greek banks up

European shares retreat; Greek banks up

London: European shares edged lower on Monday as investors cashed in on six-month high prices in the previous session, although Greek banks lead financials higher after the country ruled out a snap election.

The Athens bourse’s banking index jumped 3.4%, led by ATEbank and Alpha Bank which jumped 3.6 and 4.4% respectively. Other European banks were also higher, with HSBC, Lloyds and Credit Suisse up 0.6 to 1.2%.

But Germany’s second-biggest lender Commerzbank fell 4% after missing forecasts for third-quarter profit as losses on commercial mortgages and the costs of integrating Dresdner Bank offset strong corporate lending.

At 0944 GMT, the FTSEurofirst 300 index of top European shares was down 0.2% at 1,109.23 points after closing at its highest since mid-April on Friday. The index is up 6% so far this year.

“Some degree of profit-taking doesn’t come as a surprise after a gain of about 15% since late August. The market might lack a little bit of direction for the first day or two of the week," said Keith Bowman, analyst at Hargreaves Lansdown.

“We have certainly seen a slight uptick in sentiment, but we are still likely to remain very data-sensitive. The third quarter results season has broadly been favourable.

Sentiment turned positive as the outlook for the US economy brightened following the Fed’s announcement last week to buy more debt and after encouraging U.S. jobs data on Friday.

Figures also showed German exports grew twice as fast as expected in September, widening the trade surplus in a fresh sign the recovery in Europe’s largest economy is holding up well.

Across Europe, the FTSE 100, Germany’s DAX and France’s CAC 40 fell 0.2 to 0.3%. The Thomson Reuters Peripheral Eurozone Countries Index was down 1.5%.

Bank of Ireland fell 4.7% as Ireland’s main opposition party said on Sunday it will not back next month’s budget, further limiting the shaky coalition’s chances of getting harsh austerity cuts past a slim parliamentary majority. Allied Irish Banks fell 2.5%.

Telecom shares also suffered, with Telecom Italia falling 1.1% after Credit Suisse cut the company to “neutral" from “outperform". Deutsche Telekom fell 0.7%, while BT Group was down 0.9%.

Technical indicators indicated a sell-off, with the relative strength index (RSI) for the FTSE 100 currently at 65 and the DAX’s RSI at 71. Seventy and above is considered “overbought". Both indexes hit two-year highs last week.

Rolls-Royce fell 2.2%, extending a 9.7% drop in the previous two sessions, after Qantas Airways grounded its A380 fleet for at least another three days as it investigates oil leaks on Rolls-Royce engines.

“The fact is Rolls has had four engine failures in two and a half months and the negative newsflow doesn’t look like stopping just yet. The stock is under continued pressure and this might well continue as Rolls will be liable to Qantas and Singapore for operational losses," said Jason Adams, analyst at Nomura.