UK Stocks Closing: European shares fell for a third straight session on Thursday,weighed down by negative growth forecasts for the euro zone and poor results from some of region’s lenders,but charts showed the market still enjoys technical support.
The euro zone economy is expected to contract by 0.3 per cent,versus previous expectations for a 0.5 rise,European Union data showed,pointing to a tough road ahead for corporate earnings,as well as governments trying to cut their deficits.
Auto stocks,which are heavily exposed to domestic demand,were the biggest losers,shedding 1.7 per cent,although the sector was still up 30 per cent year to date.
It gave people a very easy reason to sell: ‘I made my money,thank you very much’,said Erich Hauser,auto analyst at Credit Suisse.
The auto sector gauge had sent a bearish signal on Wednesday,when it closed below the full retracement level of the Feb. 9 through Feb 16 move.
Europe was normally trading at a discount to Asia or the US and actually today it is at a same multiple as the other regions despite being less profitable,Hauser added.
The STOXX 600 auto index traded at 17.3 times its forecast earnings for the next 12 months,compared with a 16.7 multiple for the equivalent sector on the Thomson Reuters North America index,Thomson Reuters StarMine data showed.
Fiat and Peugeot,which rely on Europe for 30 per cent and 70 per cent of their sales,fell 4.5 per cent and 2.6 per cent respectively.
The FTSEurofirst 300 index of top European shares closed 0.2 per cent lower at 1,075.32 points,just below its 14-day moving average,in what is normally considered a bearish signal.
The daily MACD (moving average convergence divergence) is posting a bearish divergence for the first time since the rally began in December 2011 and the daily oscillators are losing upward momentum,Nicolas Suiffet,a technical analyst at Trading Central,said.
Suiffet,however,said there was no immediate sell signal and the index,which was still supported by its rising 20-day moving average at 1,068,could remain stuck between that level and 1,091,a level last tested on Tuesday.
Grim macro forecasts for the euro zone were echoed by bearish outlook comments by Commerzbank and Credit Agricole,which fell 6.3 per cent and 4 per cent respectively after recording hefty losses on their holdings of Greek debt and warning about tough market conditions ahead.
French investment bank Natixis was a notable outperformer,rising 8.4 per cent in volume 5 times its 90-day average after reporting a milder-than-expected 32 per cent decline in quarterly profits.
Toughening economic conditions in Europe were also blamed by steel tube maker Vallourec as it said the first quarter of 2012 had been weak,sending the shares sliding over 6 per cent in volume nearly three time the 90-day average.
The results came as heightened tension between Iran and the West sent Brent prices in euro terms to their highest ever,piling pressure on the margins of corporates that rely on oil for their business.
Weak growth prospects led Steven Bell,a director at hedge fund GLC,which has $680 million under management,to close a long position on Germnay’s Dax index earlier this month,leaving him with no holding of European equities.
In contrast,Bell is long equities in the United States and Asia,where he expects economic growth to support corporate earnings.