European shares close flat, miners slip

Last Updated: Thu, Feb 20, 2014 18:10 hrs

* FTSEurofirst 300 index ends flat after losses

* Miners slip on disappointing Chinese factory data

* Randstad slumps, warns of only gradual improvement

* BAE Systems slips after warning on earnings

By Atul Prakash

LONDON, Feb 20 (Reuters) - European shares recouped early losses to end flat on Thursday, helped by a rally in U.S. equities after strong manufacturing data, but sentiment remained fragile and miners slipped on disappointing data from China.

Shares on Wall Street rose 0.4 to 0.6 percent after February data showed U.S. manufacturing activity accelerated at its fastest pace in nearly four years, prompting investors in Europe to snap beaten-down stocks in late trade.

But overall sentiment remained jittery following poor data from China, France and the U.S. mid-Atlantic region. Investors were also rattled by the minutes of the U.S. Federal Reserve's meeting indicating the central bank might keep trimming its stimulus.

The European basic resources index fell 1.1 percent to the bottom of sectoral losers after China's flash Markit/HSBC Purchasing Managers' Index fell to a seven-month low of 48.3 in February, suggesting a manufacturing contraction in China, the world's top metals consumer.

"While we expect the recovery to continue during the course of this year, the market remains volatile in the near-term as investors are nervous on the back of the U.S. tapering story," Henk Potts, equity strategist at Barclays Wealth, said.

"Chinese PMI data has been disappointing, but ... long-term fundamentals for China remain good and we are still talking about 7 to 8 percent growth per annum over the course of the next five years."

Some other cyclical sectors lost ground, with the industrial goods and services index falling 0.7 percent, led lower by Europe's biggest defence contractor BAE Systems.

BAE shares fell 8.3 percent after the company warned its earnings could drop by up to 10 percent this year as a result of U.S. spending cuts.


Dutch staffing company Randstad fell 10.5 percent to make it the worst-performing FTSEurofirst 300 stock in percentage terms because the company expects only a gradual improvement in the current quarter due to the patchy nature of the fledgling global economic recovery.

"The economic numbers are mixed. People are taking a step back and waiting for more visibility on the global economy before going back in to push markets higher," said Francois Savary, chief investment officer at Swiss bank Reyl.

The FTSEurofirst 300 closed flat at 1,338.77 points after falling as low as 1,324.36, the lowest in a week, after hitting its highest since late January on Wednesday. Germany's benchmark DAX shares index, however, fell 0.4 percent.

Darren Courtney-Cook, head of trading at Central Markets Investment Management, saw some weakness in European equity markets in the coming sessions.

"We've had bad Chinese data and the very fact that there is chatter about the Fed changing its guidance on rates is also weighing on sentiment," said Courtney-Cook, who said he had sold positions on Germany's DAX futures contract at 9,700 points before buying back in at 9,500 points.

Toby Campbell-Gray, head of trading at Tavira Securities, also expected European shares to fall in the next few sessions but remained more bullish longer-term over 2014, and Reyl's Savary said equities remained his preferred asset class.

"I do see the market as being a little bit softer in the next few days but I would use days like this to pick up quality stocks," said Campbell-Gray.

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