LONDON: European equities fell for a fourth straight session on Monday and were poised for further weakness as a growing batch of gloomy economic and corporate data compounded concerns about European authorities' response to the crisis.
Basic resources and tech shares led fallers as disappointing Chinese inflation and weak numbers from Japan's services and manufacturing sectors came hard on the heels of a worse-than-expected US jobs report on Friday.
"Some investors (had been) expecting the Chinese would continue to grow and manage their slowdown, which would mean that European exports would still go well," the head of institutional sales at a leading investment bank in London said.
The pan-European FTSEurofirst 300 index of top European shares closed down 0.4 percent at 1,030.09 points in volume that was 76 percent of its 90-day average, while the euro zone's Euro STOXX 50 shed 0.3 percent to 2,227.91 points after falling 3.7 percent in the previous three days.
The indexes extended a pullback from two-month highs hit last Tuesday as euphoria over an EU deal aimed at stemming the euro zone crisis faded. Investors are concerned that decisions on banking supervision, bailout money, aid to Spain and Cyprus and whether to grant concessions to Greece are likely to take months to finalise.
Euro zone banks came under pressure on Monday ahead of a meeting of finance ministers in Brussels later in the day. Spain's Bankia and Banco Santander were among top fallers as yields on Spanish debt rose - a sign investors were expecting little respite from the summit, at which Madrid is expected to secure more time to meet its deficit targets.
"The market already anticipates that everything necessary will be done to avoid the banking crisis but this won't solve the structural problems," said Stefan Angele, head of investment management at Swiss and Global, which has assets under management worth 85 billion Swiss francs.
Among key issues for the banking sector, Angele cited the need for more capital, which would require public acceptance that more official aid to the sector is needed.
"I would be surprised to see a credible solution that triggers the next big rally. I'd expect a quite volatile, sideways market."
Weekly charts on the Euro STOXX 50 also suggested further consolidation was likely after the index broke below a trading range known as the Ichimoku Cloud at 2,300 points last week, although it was still supported by a conversion line at 2,191.
"I couldn't get bullish on the Euro STOXX until we get above (the cloud at) 2,482, so I'd much rather sell rallies into the 2,340 area, that is the baseline," said Simon Smollett, a senior strategist and technical analyst at Credit Agricole.
Societe Generale recommended using low implied volatility levels across asset classes to buy options at an attractive price and protect against future share price swings. The Euro STOXX volatility index, which measures options on euro zone blue chips and is used as a rough gauge of investors' concerns about future share movements, was up 0.1 percent, extending a rebound from three-month lows hit last week.
Earnings at euro zone blue chips are forecast to fall 5.5 percent year-on-year in the second quarter, on average, according to Thomson Reuters Starmine data.
Metro, the world's No.4 retailer, was a front-runner as it said it would not escape the impact of the European debt crisis, which was hitting demand in Germany. Its shares fell 6.3 percent, the biggest faller on the FTSEurofirst 300.-Reuters
Basic resources and tech shares led fallers as disappointing Chinese inflation and weak numbers from Japan's services and manufacturing sectors came hard on the heels of a worse-than-expected US jobs report on Friday.
"Some investors (had been) expecting the Chinese would continue to grow and manage their slowdown, which would mean that European exports would still go well," the head of institutional sales at a leading investment bank in London said.
The pan-European FTSEurofirst 300 index of top European shares closed down 0.4 percent at 1,030.09 points in volume that was 76 percent of its 90-day average, while the euro zone's Euro STOXX 50 shed 0.3 percent to 2,227.91 points after falling 3.7 percent in the previous three days.
The indexes extended a pullback from two-month highs hit last Tuesday as euphoria over an EU deal aimed at stemming the euro zone crisis faded. Investors are concerned that decisions on banking supervision, bailout money, aid to Spain and Cyprus and whether to grant concessions to Greece are likely to take months to finalise.
Euro zone banks came under pressure on Monday ahead of a meeting of finance ministers in Brussels later in the day. Spain's Bankia and Banco Santander were among top fallers as yields on Spanish debt rose - a sign investors were expecting little respite from the summit, at which Madrid is expected to secure more time to meet its deficit targets.
"The market already anticipates that everything necessary will be done to avoid the banking crisis but this won't solve the structural problems," said Stefan Angele, head of investment management at Swiss and Global, which has assets under management worth 85 billion Swiss francs.
Among key issues for the banking sector, Angele cited the need for more capital, which would require public acceptance that more official aid to the sector is needed.
"I would be surprised to see a credible solution that triggers the next big rally. I'd expect a quite volatile, sideways market."
Weekly charts on the Euro STOXX 50 also suggested further consolidation was likely after the index broke below a trading range known as the Ichimoku Cloud at 2,300 points last week, although it was still supported by a conversion line at 2,191.
"I couldn't get bullish on the Euro STOXX until we get above (the cloud at) 2,482, so I'd much rather sell rallies into the 2,340 area, that is the baseline," said Simon Smollett, a senior strategist and technical analyst at Credit Agricole.
Societe Generale recommended using low implied volatility levels across asset classes to buy options at an attractive price and protect against future share price swings. The Euro STOXX volatility index, which measures options on euro zone blue chips and is used as a rough gauge of investors' concerns about future share movements, was up 0.1 percent, extending a rebound from three-month lows hit last week.
Earnings at euro zone blue chips are forecast to fall 5.5 percent year-on-year in the second quarter, on average, according to Thomson Reuters Starmine data.
Metro, the world's No.4 retailer, was a front-runner as it said it would not escape the impact of the European debt crisis, which was hitting demand in Germany. Its shares fell 6.3 percent, the biggest faller on the FTSEurofirst 300.-Reuters
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