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European shares fall for fourth day on U.S. gloom

Source : REUTERS
Last Updated: Wed, Jul 25, 2012 17:00 hrs

* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 up 0.4 pct

* Weak U.S. home sales, Apple sales wipe off early rebound

* Spanish Italian shares boosted by speculation of ESM boost

By Francesco Canepa

LONDON, July 25 (Reuters) - European stocks extended their fall into a fourth session in thin trade on Wednesday and braced for further losses as weak U.S. home sales data and revenue from consumer bellwether Apple wiped out a tentative rebound.

Pan-European indexes turned negative in the afternoon, when data showed U.S. single-family home sales fell by the most in more than a year in June and Apple's quarterly revenue came in lower than expected, hit by a sagging European economy.

The weak numbers from the United States came hard on the heels of a disappointing reading for Germany's Ifo sentiment index and much worse-than-expected U.K. preliminary GDP data for the second quarter.

"U.S. new home sales printed as the lowest on record, UK and German data (earlier on Wednesday) were weak and the euro zone debt drama remains," Ishaq Siddiqi, a market strategist at ETX Capital said.

"The push up earlier on ... could never be sustainable"

European shares had traded higher for most of the day, helped by speculation the euro zone's bailout fund could be given access to central bank money to help it defuse the region's sovereign debt crisis, as suggested by European Central Bank policy maker Ewald Nowotny on Wednesday.

Nowotny's comments helped Italy's FTSE MIB and Spain's Ibex 35 rise 1.2 percent and 0.8 percent respectively, after shedding around 10 percent in the previous three sessions, while yields on the countries' bonds fell and the euro gained ground against the greenback .

"The market is driven by political announcements, which is a reason to be nervous because politicians themselves are in uncharted territory," Lorne Baring, managing director of B Capital Wealth Management, said.

"Many investors and managers were whipsawed last summer and there is a good possibility that it will be that kind of market behaviour again this year, with accentuated moves to the up and downside."

Baring said he was "steering clear" of European equities after closing his only positions -- in Germany's Dax and Britain's -- earlier this month, when the yield on Spain's 10-year bond climbed above the psychological 7 percent threshold.

He was monitoring the Spanish bond yield, the euro and indicators of the state of the funding market for any sign that sentiment was improving, providing a new entry point for European equities, while he kept his "overweight" positions on U.S. shares and the dollar.

The FTSEurofirst 300 index provisionally closed 0.72 points lower, or 0.1 percent, at 1,017.89 points, adding to the 45.86 points shed in the previous three sessions on mounting concerns about the sustainability of Spain's finances.

Trading volume on the index was very thin at 73 percent of its 90-day average, Thomson Reuters data showed, exacerbating swings in share prices.

MIXED EARNINGS

Britain's ARM Holdings was the top riser, up 8.6 percent in twice its volume average, as its results showed demand for the firm's low-power chips, used in smartphones, outstripped the industry.

German car maker Daimler led a rally among auto stocks after posting a smaller-than-expected decline in results and sticking to its forecast for roughly flat underlying profits this year.

Shares in the group were up 4.1 percent, the best performers in a 1.9 percent stronger European auto sector.

About a fifth of major European companies have reported results so far this earnings season, with half missing analysts' forecasts, Thomson Reuters Starmine data shows.

Earnings growth estimates have been cut by around 6 percent since the start of the year for European companies, compared with 1.7 percent for S&P 500 companies.

Confirming a mixed picture for European earnings, Deutsche Bank sank 4.1 percent after issuing a profit warning, which fuelled worries the German lender may have to raise capital.

It was the biggest faller on the Euro STOXX 50 index, which closed up 0.4 percent at 2,159.09 points.

CHARTS POINT DOWN

Technical charts suggested the euro zone blue-chip index was likely to resume its downtrend after creating a 'bearish gap' between Friday's bottom and Monday's top, which now acted as a resistance on the index between 2,220 and 2,235 points.

On Tuesday, the index had also closed a 'bullish gap' - created at the start of the late June rally - which had been supporting the gauge at 2,167-2,184 points.

"All these negative signals incite us to be bearish for the coming sessions, with a short term target corresponding to June lows at 2,050...within the next one or two weeks," Ouri Mimran, technical strategist at Natixis in Paris, said.

"We still play the break out of this level and a return to the September 2011 level low of 1,936 points (in the next couple of months)."

Mimran said this scenario would be invalidated in the short term if the Euro STOXX 50 managed to close the bearish gap at 2,235, triggering a rebound towards 2,400.




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