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European stock markets struggle as tech stocks weak

Source : REUTERS
Last Updated: Thu, Dec 20, 2012 18:58 hrs

* FTSEurofirst 300 flat around midday

* Euro STOXX 50 up 0.1 pct to 2,656.59 points

* Tech stocks weaken after Ericsson makes writedown

* Traders looking to go into year-end with "flat" books

By Sudip Kar-Gupta

LONDON, Dec 20 (Reuters) - European equity indexes slipped from multi-month highs on Thursday after fresh signs of friction in U.S. budget talks, while a fall in mobile network maker Ericsson also weighed on markets.

Many traders said they were looking for opportunities to sell shares into any rally to lock in their profits before the year-end, adding that some equity indexes looked "overbought" on a technical basis and could be poised for small falls.

The pan-European FTSEurofirst 300 index, which closed near a fresh 19-month high on Wednesday, was flat at 1,142.10 points by around midday.

The euro zone's blue-chip Euro STOXX 50 index edged up 0.1 percent to 2,656.59 points, close to a peak of 2,661.25 points reached earlier this week which was its best level since early August 2011.

Swedish group Ericsson was the worst performer on the FTSEurofirst 300, dropping 3.2 percent and pushing the STOXX 600 European technology index down 0.7 percent after announcing a fourth-quarter writedown.

"I've not really been keen on Ericsson for quite some time now. The market's flooded now with new suppliers," said JN Financial senior trader Rick Jones, who sold all his Ericsson shares in April.

U.S. BUDGET UNCERTAINTY

U.S. politicians remain locked in talks to find a deal to avoid a "fiscal cliff" of government spending cuts and tax rises due to take effect in early 2013 that could hurt the world's largest economy.

Although most investors expect a deal on the U.S. budget to be struck eventually, signs of delays have opened the way to fresh equity index falls, with moves often exacerbated since volumes have been thin ahead of the Christmas holiday period.

Equity markets rallied in July after pledges from the European Central Bank (ECB) to take new steps to fix the region's sovereign debt crisis and weak economy, which led to a bailout of Greece and a rescue deal for Spanish banks.

The FTSEurofirst 300 is up 14 percent since the start of 2012, while the Euro STOXX 50 has risen 15 percent.

Some traders said they were looking to sell to book profits on those gains now since some European equity indexes appeared "overbought" on a technical chart basis.

The Euro STOXX 50 had stepped into "overbought" territory on its 14-day its Relative Strength Index (RSI) for the first time since 2009, which meant some investors could be looking to lock in some profits at this level.

Central Markets senior broker Joe Neighbour said there were still some traders looking to use declines in the equity market to buy stocks on the cheap ahead of a possible rally in January, but on the whole investors were not taking on big positions.

"If there are profits to be had, we'll be looking to take them off the table. The dip buyers still seem to be there to look to take the market back up but we'll be looking to keep flat as we go into the new year," he said.



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