* FTSEurofirst 300 index falls 0.6 percent
* Spain’s IBEX share index hits three-year low
* Financials feature as top losers
* Technical signal more losses for equities
By Atul Prakash
LONDON, April 13 (Reuters) – European shares fell on Friday
and were on track for a fourth straight week of losses as
renewed concerns about the rising cost of borrowing in some
highly indebted euro zone countries dampening sentiment and
hitting cyclical shares such as banks.
The equity market’s outlook for the near term remained
negative following recent poor macro numbers, including Friday’s
lower-than-expected Chinese growth figures, concerns about the
state of finances in some European countries and a bearish
technical picture for an important stock index, analysts said.
Banks, down 0.9 percent, were the worst performer,
led lower by Italian banks, as higher borrowing costs at recent
Italian and Spanish bond auctions and rising Spanish yields on
data showing the country’s banks borrowed heavily from the
European Central Bank in March raised concerns about the health
of the financial sector.
At 1148 GMT, the FTSEurofirst 300 index of top
European shares was down 0.6 percent at 1,038.15 points, while
Spain’s benchmark index was down 2.1 percent after
hitting a three-year low. Italian shares fell 1.3
percent.
However, the FTSEurofirst 300 index, which hit a one-week
closing high in the previous session, and European banks cut
losses after JPMorgan reported higher earnings per
share. The share index is down 1.4 percent this week and is on
track to post its fourth straight week of losses.
Investor focus has returned to the euro zone periphery.
“It’s very difficult to impose austerity measures and
stimulate the economy. People fear a vicious spiral and rising
bond yields reflect investors’ concern that the austerity
measures are going to make things worse in some cases,” Felicity
Smith, fund manager at Bedlam Asset Management, said.
“The situation is having a negative impact on the financial
stocks, particularly in those countries which are highly
indebted,” said Smith, whose company manages $700 million.
Technical analysts remained bearish on Euro zone’s blue chip
Euro STOXX 50 index, which was 0.8 percent lower at
2,332.67 points after turning negative on the year. Analysts
said the index was testing the lower end of the trend channel
that started in September.
“I see an increasing downside risk for the index in the
coming weeks. This decline from its March highs around 2610 is
just the beginning of a larger correction,” said Roelof-Jan van
den Akker, senior technical analyst at ING Commercial Banking.
Tammo Greetfeld, equity strategist at UniCredit, predicted
the Euro STOXX 50 index to trade below the highs in the first
quarter during the April-June period.
“It is unlikely that the equity market will restart a
sustained new attempt to continue a positive equity market trend
in the coming weeks ahead of elections in France and Greece.”
DEFENSIVE BIAS
Greetfeld recommended investing in sectors with a promising
outlook for an above average stable earnings trend such as
chemicals, basic resources and oil and gas due to their global
exposure.
“We also like defensive sectors such as food and beverage,
healthcare and personal household goods, which have a promising
earnings trend, partly because of their exposure to the Asian
market too.”
Smith of Bedlam also echoed the view and said she had a
defensive bias in her portfolio, but had also got some selective
industrials which were very well placed to benefit from positive
trends in demand for gas and clean power etc.
“We also like consumer staples and healthcare sectors. The
merger and acquisition opportunities in the healthcare sector
are working in favour of some companies.”
On the positive side, miners rose 0.8 percent after
Chinese GDP data. Figures showing China’s economy grew slower
than expected in the first quarter although raised concerns
about global growth but also increased prospects for some policy
easing in the country, the world’s largest metals consumer.
“If weaker macroeconomic data from China are released,
investors have higher expectations for more monetary policy
easing soon and that often outweighs the negative impact of the
macro data itself,” Greetfeld said.
