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European shares drift lower, Jackson Hole eyed

Source : REUTERS
Last Updated: Thu, Aug 30, 2012 11:50 hrs

* FTSEurofirst 300 off 0.4 percent

* Miners weaken on China demand concerns

* Carrefour, Vivendi advance after results

By Tricia Wright

LONDON, Aug 30 (Reuters) - European shares drifted lower on Thursday, with trading volume sliding as investors stuck to the sidelines on uncertainty about how central banks will move and about the outlook for the global economy.

The FTSEurofirst 300 was down 0.4 percent at 1,081.69 by 1112 GMT, having fallen 0.2 percent on Wednesday. Trading volume stood at just 22 percent of the 90-day daily average.

Investors will closely watch U.S. Federal Reserve Chairman Ben Bernanke and other central bankers at their annual Jackson Hole, Wyoming, get-together at the end of the week where they often hint at forthcoming monetary policy moves.

Traders are also watching developments ahead of a European Central Bank meeting on Sept. 6 which could lead to the relaunch of the ECB's government bond buying programme to help tackle the region's economic crisis, and may even yield another rate cut.

Stock markets rallied sharply after ECB head Mario Draghi promised on July 26 to do "whatever it takes" to protect the euro from the region's debt problems. Equities have however failed to move much higher since mid-August.

Miners were among the biggest drags on the index, off 1.8 percent on persistent concerns over the outlook for economic growth in top metals consumer China and a further drop in the price of steelmaking ingredient iron ore, which languished at near three-year lows.

China is prepared to buy more EU government bonds amid a worsening European debt crisis that is dragging on the world economy, Premier Wen Jiabao said on Thursday.

"Chinese data is starting to really deteriorate. Given that China is of such importance to European export markets, I think that the Draghi effect has made people too complacent," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million of assets.

Underlining the slowdown in the euro zone economy, the bloc's economic sentiment deteriorated much more than expected in August, while inflation expectations among consumers jumped, data from the European Commission showed.

RESULTS ROULETTE

Mirroring the split in fortunes of companies to have reported so far, earnings news sent share prices in divergent directions on Thursday.

Carrefour was the standout gainer across Europe, up 9.5 percent, after the global retailer posted better-than-expected results.

The share price rise saw the stock burst above the 200-day moving average it had been testing for two weeks. Trading volume in Carrefour was robust, at one and a half times its 90-day daily averge.

Vivendi also notched up good gains, ahead 2.8 percent, reversing the previous session's sharp drop, after the telecom and media group posted results seen as roughly in line with expectations and announced a plan to reduce its telecom unit's operating costs.

Traded volume in Vivendi stood at around half its 90-day daily average.

WPP, meanwhile, sank 2.7 percent, one of the biggest laggards, as the world's largest advertising group nudged down its full-year outlook after cautious customers demanded better value for money in the second quarter of the year.

Trading volume in WPP was heavy at three times its 90-day daily average.

Peer Publicis Groupe was dragged down in its wake, shedding 2.4 percent.

Of the roughly 96 percent of major European companies to have reported this results season, around half have missed expectations, according to Thomson Reuters Starmine data.

Some investors are of the opinion that attractive valuations will underpin European equities.

"European equities are looking quite cheap... relative to U.S. businessess. Cheap by 10-20 percent, at relatively low valuations for a lot of the bigger European companies with global businesses," Colin McLean, managing director Scottish Value Management in Edinburgh, said.

"The market probably needs to see the Greek issues pushed a couple of years on... and then if it saw some money printing in Europe, it would probably re-rate European equities quite significantly."

The current price earnings ratio for the FTSEurofirst 300 stands at 12.85 times, against the S&P 500 at 15.05 times.




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