* FTSEurofirst 300 index finishes 2.5 pct lower
* Cyclicals such as banks, miners, autos top fallers
* Charts signal further decline for blue-chip index
By Atul Prakash
LONDON, April 10 (Reuters) – European shares hit a 12-week
low on Tuesday as fresh concerns about global growth and
pressure on some highly indebted euro zone countries hurt
cyclical stocks, with charts for a major blue-chip index showing
scope for yet further declines.
Financials, miners and automakers bore the brunt of the
sell-off after trading in Europe resumed following the Easter
holidays, reacting to Friday’s weak U.S. jobs report and Tuesday
data showing no growth in France’s economy in the first quarter.
A sharp decline in investors’ appetite for riskier assets
such as equities was also reflected in the Euro STOXX 50
volatility index, Europe’s main barometer of anxiety,
that surged 20 percent to a three-month high.
The FTSEurofirst 300 index of top European shares
finished 2.5 percent down at 1,026.15 points, the lowest close
since mid-January. It has fallen 7.5 percent since hitting an
eight-month high in March and is up just 2.5 percent this year.
“Investors are in a risk-off mode, with the U.S. job numbers
and the situation around Spain becoming an excuse for the
sell-off. I expect the market to fall 3 to 5 percent in the next
couple of weeks,” Philippe Gijsels, head of research at BNP
Paribas Fortis Global Markets, said.
“I would advise investors to take some more profits. If the
market falls 10 to 15 percent, you could start buying again as
you would expect the central banks to intervene to support the
market. Focus on defensive sectors such as pharmaceuticals and
food and beverages and companies that give high dividends.”
Europe’s debt problems prompted investors to sell out of
banks, with the STOXX Europe 600 banking index down 4.2
percent. Italian banks were a major drag after the country’s
bond yields rose again, resulting in a 5 percent fall in the
country’s FTSE MIB share index.
Yields on riskier Italian and Spanish debt climbed further,
a trend that began last week in the wake of a disappointing
Spanish bond auction, on concerns that a weaker U.S. economy
could hurt indebted European economies that are already facing
harsh austerity measures.
Miners were the second-biggest decliners, with the STOXX
Europe 600 Basic Resources index falling 4.2 percent on
concerns about a drop in demand for raw materials and as data
showed China, the world’s top metals consumer, imported 4.6
percent less copper in March.
However, Randgold Resources rose 5.2 percent on
hopes of an easing of the crisis in Mali, home to two thirds of
the miner’s production, following the resignation of the
president and after it confirmed its production target for the
year.
TECHNICALS BEARISH
The Euro STOXX 50 fell 3 percent to 2,321.53
points. Technical analysts saw further declines in the near term
after the index fell below some important support levels.
“The market is aggressively bearish. A close below the
200-day moving average is an important sign for further
downside. The next downside target would be 2,307 – a low in
January,” Lynnden Branigan, technical analyst at Barclays
Capital, said.
He saw another support at around 2,280, its 76.4 percent
retracement of a rise from mid-December 2011 to mid-March.
Investors will focus on the earnings season that begins with
U.S. aluminium giant Alcoa reporting late on Tuesday.
Investors will scrutinise numbers in the coming weeks to see how
a slow pace of economic recovery has impacted on profit margins.
JPMorgan stayed cautious in the near-term on equities due to
the loss of macro momentum and said it was unlikely that
first-quarter results would restore confidence.
“We believe it is unlikely to provide a significant boost to
the market. Weaker topline growth and stalling macro momentum
argue against strong improvement in corporate guidances,” the
broker said in a note.
However, HSBC remained positive on the market’s long-term
outlook saying that the largest tail risk to investing in
equities had been removed. Its year-end target for the MSCI all
country index is for a 7 percent rise.
Automobile shares also suffered heavily, with the sector
index falling 4.1 percent on concerns about economic
growth outlook that could hurt sales of vehicle demand.
Fiat fell 6.4 percent as Brazil, a key market for
the automaker, after the country said it had no plans to offer
further incentives for car producers.
