European shares edge lower, snapping 6-day rally

European shares edge lower, snapping 6-day rally

London: European shares dipped slightly on Wednesday, snapping a six-day winning run, with banks sliding on concerns over expected tough new capital and risk rules for the sector.

Tech stocks helped limit losses, after ASML raised its sales forecast and following US giant Intel’s results.

The FTSEurofirst 300 of top European shares fell 0.03% to close at 1,045.11 points.

The index had risen 8.2% over the previous six sessions, with the Stoxx Europe 600 Banking Index up 13.5%, on hopes most banks would pass the stress tests. But analysts say enough optimism had been factored into share prices.

“The market is going to be a bit nervous until we can see the stress tests," said Colin McLean, managing director at fund manager SVM in Edinburgh.

BNP Paribas, HSBC and Societe Generale fell between 0.7% and 2.2%.

The pan-European index soared 62% between hitting a a lifetime low in March, 2009 and the end of the year. But it is in negative territory in 2010, down 0.1%, and more than 6% down from a mid-April peak, partly on worries about debt levels in Europe and the pace of economic recovery.

“It’s had a brief respite. It hasn’t broken the downward trend," said McLean.

Investors kept a close eye on a meeting of the Basel Committee of banking supervisors and central bankers in Switzerland, as they started to finalise tough new bank capital and liquidity rules.

Adding to worries in the sector, borrowing by Spanish banks from the European Central Bank surged in June to a new record high, indicating tight access to funding before the expiry of €442 billion in one-year ECB loans at the start of July.

However, technology stocks gained on upbeat corporate news.

Dutch chip equipment maker ASML rose 3.1% after raising its 2010 sales outlook by at least 105 as a broadly improving outlook for the chip industry drove better-than-expected second quarter results.

Late on Tuesday, Intel, the world’s top micro-chip maker, reported second-quarter earnings that beat analysts’ expectations, allaying fears that companies may be slowing down their spending on technology.

Europe’s technology sector advanced 1.2%, with STMicroelectronics, Infineon and ARM Holdings gaining 2.3% to 3.1%.

SVM’s McLean said worries were about regulation and macroeconomics rather than about company news.

“The market seems inclined to take second-quarter earnings well," he said.

BP falls

Among individual movers, BP fell 2.3%. The oil major said it delayed a critical test to determine if it can close a cap on top of its ruptured well in the Gulf of Mexico.

The stock is down 39% from a peak in April.

Across Europe, the FTSE 100 and France’s CAC 40 fell 0.3% and 0.1% respectively. Germany’s DAX rose 0.3%. The Thomson Reuters Peripheral Eurozone Countries Index rose 0.5%.

Wall Street was higher around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were up between 0.1% and 0.4%.

However, data suggested that the pace of recovery in the United States, the word’s biggest economy, was moderate. Sales at US retailers fell 0.5%, down for a second month.

Investors also looked ahead to a statement from the Federal Reserve later Wednesday about the outlook for the US economy.