European shares fall ahead of Slovak vote on EFSF

European shares fall ahead of Slovak vote on EFSF

London: European shares fell on Tuesday after a four-day rally, as investors awaited a vote in the Slovak parliament to ratify wider powers for the euro zone’s rescue fund.

Slovakia’s lawmakers are split over the plan to boost the size and scope of the European Financial Stability Facility (EFSF), which policymakers hope will contain the Greek debt crisis.

All other countries have voted in favour of the changes to the rescue fund and are waiting on Slovakia, the last of the 17-member bloc to vote on the deal.

“After a rally over the past few days there is nervousness ahead of the Slovak vote," said Ian King, head of international equities at Legal & General, which has $557 billion under management.

“People would like to see more concrete action sooner, but we are dealing with 17 different countries, and opinions between policymakers are varied, and consensus between them is going to take time. The market does not like uncertainty."

Also worrying investors was the start of the US earnings season, with America’s biggest aluminium producer Alcoa releasing third-quarter results after the market close, which should give some clues about how the slowdown is affecting companies.

The STOXX Europe 600 Basic Resources index were weighed down by the growth worries, falling 1.4% as investors booked profits after making a 15.6% over the past four days.

Copper miners such as Kazakhmys and Xstrata were among the worst performers on the FTSE 100 , tracking the metal lower.

By 4:52pm, the pan-European FTSEurofirst 300 index of top shares was down 0.8% at 956.65 points after gaining 8.6% over the past four days on hopes that policymakers were coming up with an action plan to help ease the region’s debt crisis.

The benchmark index was edging towards a support level, its 38.2% Fibonacci Retracement, or 950.77 points from its July to September sell-off, while the next resistance level was seen at the 50% Fibonacci Retracement, 980.98.

The Euro STOXX 50 volatility index rose 3.6% after falling 24.8% over the past four days. The higher the volatility index, the lower investors’ appetite for risk.

German retailer Metro dropped 3.7%, leading losers on Germany’s blue-chip index , after Goldman Sachs cut its investment rating to “neutral" from “buy".

“We believe that uncertainty around the CEO succession could weigh on the shares in the coming months as the market assesses how the company’s strategy could change," Goldman Sachs wrote in a note.