Europe shares hit 2-week low on regulation fears

By Atul Prakash

LONDON (BestGrowthStock) – European shares fell for a second session on Thursday to a two-week closing low, with poor U.S. economic numbers and growing anxiety over possible tougher regulation in the eurozone unsettling investors.

Financial shares were hit hard, with the STOXX Europe 600 banking index (.SX7P: ) falling 1.9 percent. Miners also came under pressure as metals prices slipped on concerns about demand for industrial metals, especially in the developed world. The European basic resources index (.SXPP: ) was down 4.2 percent.

Standard Chartered (STAN.L: ), HSBC (HSBA.L: ), Barclays (BARC.L: ), Lloyds (LLOY.L: ), Royal Bank of Scotland (RBS.L: ), BNP Paribas (BNPP.PA: ), Societe Generale (SOGN.PA: ), Credit Agricole (CAGR.PA: ) and Natixis (CNAT.PA: ) fell 0.5 to 3.1 percent.

The FTSEurofirst 300 (.FTEU3: ) index of top European shares finished 2.2 percent down at 974.80 points, its lowest close since May 7, after falling to a two-week low of 959.44 earlier in the session. The index is down 6.8 percent for 2010, but is still up 51 percent since hitting a record low in March last year.

“There are concerns that Europe is not speaking with one voice and that there may be stiffer regulation coming through,” said Klaus Wiener, head of research at Generali Investments.

“Also hurting the market is growing fear that global economic growth will suffer at some point because of bigger-than-needed fiscal consolidation.”

Germany said restoring confidence in the euro was its top priority, demanding tougher regulation and oversight to protect the single currency.

The euro fell (Read more about the trembling euro. ) to trade near Wednesday’s four-year lows, staying vulnerable on concerns that other European countries may announce regulations similar to Germany’s ban on naked short selling of some stocks and bonds.

Analysts fear the drive to restore fiscal balances will slow down economies in the European Union just as they recover from the sharp global downturn. Greece has been forced to impose drastic austerity measures, while Spain and Portugal have also embarked on painful public spending cuts.

Appetite for risky assets fell, with the VDAX-NEW volatility index (.V1XI: ) surging to 14-month highs. The higher the index, which is based on sell and buy options on Frankfurt’s top-30 stocks (0#.GDAXI: ), the lower the market’s desire to take risk.

“Leading indicators are likely to head lower for the next couple of months on the back of all the austerity measures that have been announced over the last couple of weeks and on the impact this will have on growth,” said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.


Chartists painted a bleak picture.

“Our sort-term outlook is bearish,” said Michael Riesner, head of equities technical analysis at UBS Investment Bank.

He said the FTSEurofirst 300 had a minor support at 967 points — an eight-month closing low in early May — and a break of the level could trigger a deeper correction toward 890, which is the 50 percent Fibonacci retracement of its rise from a record low in March last year to a high in mid-April of 2010.

U.S. data also dampened market sentiment. The Labor Department said the number of U.S. workers filing new applications for unemployment benefits unexpectedly rose last week, while the Conference Board said its index of leading economic indicators slipped 0.1 percent last month.

Miners felt the pressure of a broader market sell-off, with BHP Billiton (BLT.L: ), Anglo American (AAL.L: ), Antofagasta (ANTO.L: ), Rio Tinto (RIO.L: ), Xstrata (XTA.L: ) and Eurasian Natural Resources (ENRC.L: ) falling 2.2 to 5.9 percent.

Among individual stocks, SABMiller (SAB.L: ) sank 6 percent after saying it expected a recovery in consumer spending only toward the end of 2010 and reported a 17 percent rise in annual earnings which narrowly missed consensus forecasts.

About 448 million shares changed hands on the FTSEurofirst 300, representing 157 percent of its 90-day daily average volume. The average daily volume in 2009 was 253 million shares.

Across Europe, Britain’s FTSE 100 index (.FTSE: ), Germany’s DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) fell 1.7-2.3 percent.

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(Editing by Erica Billingham)

Europe shares hit 2-week low on regulation fears