Disappointing macro figures hurt European equities

* FTSEurofirst 300 index closes 1 percent lower

* Disappointing economic data hurt market sentiment

* Energy, banking shares among top decliners

By Atul Prakash

LONDON, June 1 (Reuters) – European shares ended sharply lower on Wednesday as risk appetite waned after data showed a slowdown in U.S. manufacturing activity in May and a much lower than expected increase in U.S. private sector employment.

Wednesday’s U.S. economic indicators, combined with figures showing factory growth eased in Europe and Asia in May, raised fresh questions about the pace of global economic recovery.

The Euro STOXX 50 volatility index, one of Europe’s main barometers of market sentiment, rose as much as 5.5 percent before paring some gains, suggesting a fall in appetite for equities. Charts indicated the market would be trapped in a range for the next trading sessions.

The FTSEurofirst 300 index of top European shares ended 1 percent lower at 1,131.01 points after falling to a low of 1,128.16 earlier in the session.

Energy shares featured among the top decliners, with the STOXX Europe 600 oil and gas index down 1.5 percent, as the economic numbers weighed on the demand outlook for crude.

“Certainly the macroeconomic numbers are casting a shadow over the pace of economic growth going forward,” said Keith Bowman, equity analyst at Hargreaves Lansdown, adding the data would have the potential to impact corporate earnings expectations.

The U.S. Institute for Supply Management’s index of national factory activity fell to 53.5 in May from 60.4 the month before, against economists’ expectations for 57.7.

Private-sector U.S. job growth also tumbled to just 38,000, its lowest in eight months, prompting economists to slash their forecasts for Friday’s closely watched U.S. payrolls report.

 

TECHNICAL PICTURE

The Euro STOXX 50, the euro zone’s blue chip index, was down 1.2 percent at 2,827.66 points. It fell below its 200-day moving average after failing to break its resistance at 2,873.

“For the next few sessions, the index would be trapped in a range between the long-term trend line at 2,790 and the 200-day moving average at 2,873. A break in either direction will be likely to trigger a strong reaction,” said Dmytro Bondar, technical analyst at RBS.

Investors took shelter in safe-haven government bonds and gold.

“This week has seen a raft of worrying economic data releases from the major economic powerhouses and this has been enough to quash any optimism that might have built up in recent days,” said Angus Campbell, head of sales at Capital Spreads.

“These figures are in line with data from earlier in the week that was also much lower than forecasts and it’s only today that the sellers have really been able to say to the bulls ‘I told you so'”.

Financial companies, which generally gather strength from a rise in economic activity, lost ground. The STOXX Europe 600 banking index fell 1.4 percent, while KBC was down 6.2 percent.

Italy’s Banca Monte dei Paschi di Siena fell 7.6 percent after its main owner, the Foundation Monte Paschi, sold 450 million preference shares.

Some fund managers, however, remained positive about the stock market’s outlook inn the longer term.

“I don’t think this is the beginning of a downturn. With oil prices lower, we will see a bit of rebound. We will not go back to old strengths, but I think that global growth will remain solid,” said Klaus Wiener, chief economist at Generali Investments, which manages 330 billion euros ($474.3 billion).

Nokia fell 0.8 percent. Analysts predicted more gloom ahead for the company and the struggling phone maker was forced to deny talk it would sell its core business to Microsoft.