U.S. data, Cyprus knock Europe shares lower

U.S. data, Cyprus knock Europe shares lower

Last Updated: Fri, Apr 12, 2013 17:20 hrs

* FTSEurofirst 300 down 0.9 pct, Euro STOXX 50 down 1.5 pct

* Euro STOXX 50 drops back below 50-day moving average

* Miners drop as gold prices plunges, copper sinks

* Pharmas big winners year-to-date, miners lag

By Blaise Robinson

PARIS, April 12 (Reuters) - European shares sank on Friday, reversing nearly half of the week's gains, knocked lower by rekindled worries about Cyprus's bailout plan and an unexpected drop in U.S. monthly retail sales.

Miners were particularly hammered, with Eurasian down 3 percent and Randgold Resources down 4.6 percent, as metal prices like gold and copper sharply fell.

Gold prices sagged 4 percent to their lowest level since July 2011, breaking below $1,500 per ounce, as downbeat factors such a draft plan for Cyprus to sell bullion to help pay for its bailout prompted prices to capitulate.

The FTSEurofirst 300 index of top European shares closed 0.9 percent lower at 1,182.10 points, while the euro zone's blue chip Euro STOXX 50 index fell 1.5 percent to 2,633.47 points.

The Euro STOXX 50 fell back below its 50-day moving average, and closing the week below it was seen by technical analysts as a strong bearish signal.

Early on Friday, Luxembourg Finance Minister Luc Frieden warned that Europe and the International Monetary Fund could not increase their 10 billion euro contribution to a bailout for Cyprus despite news that the cost for the debt-stricken island could be bigger than initially estimated.

Although the European Commission said it would try to help the island's economy to grow again with better use of EU structural funds, the renewed focus on Cyprus's finance requirements caused investor nervousness.

"People are realising that the Cypriot bailout is not a done deal at all, and that's pouring cold water on risk appetite seen earlier in the week. Cyprus is basically back to square one," said Christian Jimenez, fund manager and president of Diamant Bleu Gestion, in Paris.

"We took some profits after the big bounce earlier this week. We remain positive for stocks on the long term, but this is a very tactical market where you have to take advantage of the pull-backs to get in and quickly take your gains when the market hits a top."

Euro zone banking stocks tumbled, with Germany's Deutsche Bank losing 3.6 percent, France's BNP Paribas falling 3 percent and Italy's Banco Popolare sinking 3.9 percent.

The euro zone STOXX banking index has tumbled 18 percent since a peak in late January, as the return of turbulence in Europe - from Italy's political impasse to Cyprus's debt crisis - has prompted investors to switch to sectors seen as more defensive.

Sectors such as pharma, food and beverages, and telecoms have led the market so far this year, up 13 percent, 12 percent and 8 percent respectively, while the euro zone bank sector is down 6.5 percent and the basic resources sector - home to heavyweight steel and mining shares - has tumbled 15 percent.

Around Europe on Friday, the UK's FTSE 100 index fell 0.5 percent, Germany's DAX index lost 1.6 percent, and France's CAC 40 shed 1.2 percent.

Bucking the trend, Telecom Italia added 3.8 percent after saying it is looking at a possible tie-up with Hutchison Whampoa as well as a potential spin-off of its fixed-line domestic network.

Corporate results from the United States failed to lift overall investor sentiment, with JP Morgan posting higher profit but a decline in revenue, and Wells Fargo 's profit was better-than-expected but it made fewer home loans.

David Thebault, head of quantitative sales trading at Global Equities. warned that results in the earnings season which has just started could be misleading.

"People should be cautious about how to read earnings because forecasts have been slashed. So we might get a lot of 'beat-the-forecast' results, but it won't mean everything is rosy," he said.

"This pull-back is probably not over, so even though I'm looking at buying some deep-value stocks in the next little while, I'm also buying put spreads on the index as a protection against more losses."

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