European shares end volatile quarter with tiny gain

By Blaise Robinson

PARIS (Reuters) – European stocks fell back on Thursday, halting an almost uninterrupted two-week rise as renewed fears over Portugal’s debt crisis prompted investors to book profits on the last session of the quarter.

Investors were also kept on edge ahead of the results of stress tests on the Irish banks, which were released at the closing bell.

The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) index of top European shares closed 0.9 percent lower at 1.124.88 points, ending the roller-coaster quarter with a gain of 0.3 percent.

The benchmark index surged 6 percent in the first six weeks of the year, before escalating violence in Libya and Japan’s devastating earthquake derailed the market rally.

“From Portugal’s debt woes and the health of the Irish banks to Japan’s crisis and the turmoil in the Middle East, the risks are still simmering, so people are booking profits on some of the stocks that have performed the most this quarter,” said David Thebault, head of quantitative sales trading at Global Equities.

Market indexes of the peripheral euro zone countries such as Spain’s IBEX 35 (.IBEX: Quote, Profile, Research), Portugal’s PSI 20 (.PSI20: Quote, Profile, Research) and Italy’s FTSE MIB (.FTMIB: Quote, Profile, Research) were hammered on Thursday in big volumes, losing 1.2-1.5 percent on the day, hurt by data showing Portugal’s budget deficit ballooned above target last year, a week after Prime Minister Jose Socrates resigned following the rejection by parliament of a new round of budget cutbacks.

After the closing bell, Ireland said its four remaining banks require another 24 billion euros ($34.1 billion) to enable them to withstand potential losses from a worsening of the economy and the four banks would be reduced to two in a restructuring.

“It appears to be at the lower end of expectations, but the question remains, will the market think this is enough and what will the potential knock-on effects be across Europe?,” said Mark Roberts, banks specialist sales, at Societe Generale.

Despite the drop on Thursday, Spain’s IBEX, Italy’s FTSE MIB and Portugal’s PSI 20 managed to outperform Europe’s broad indexes for the quarter, gaining respectively 7.3 percent, 7.7 percent and 2.2 percent.

Some of the top European blue chip performers over the past three months also featured among the biggest losers on Thursday, with Credit Agricole (CAGR.PA: Quote, Profile, Research) down 3.6 percent and Societe Generale (SOGN.PA: Quote, Profile, Research) down 3.4 percent. The two French banks ended the quarter up 22 percent and 14 percent, respectively.

(Additional reporting by Simon Jessop in London; Editing by Greg Mahlich)

European shares end volatile quarter with tiny gain