U.S. data drags European shares to 1-mth closing low

By Atul Prakash

LONDON (BestGrowthStock) – European shares hit a one-month closing low on Thursday after data showed new claims for U.S. jobless benefits rose to a nine-month high and factory activity in the Mid-Atlantic region unexpectedly contracted.

Disappointing economic numbers put pressure especially on financial and commodity shares, with the STOXX Europe banking index, the basic resources index and the oil and gas index

falling 1.9 to 2 percent.

The FTSEurofirst 300 index of top European shares fell for a second straight session to end down 1.5 percent at 1,036.84 points, the lowest close since July 21. Volumes on the index were 70 percent of its 90-day daily average.

“The U.S. macroeconomic numbers once again increased doubts regarding the strengths of the U.S. economy in the second half and raised concerns that the economy might be weakening more than previously anticipated,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.

“Investors … will increasingly ask themselves how much scope the U.S. central bank actually does have to successfully counter an economic downturn, if needed.” Initial claims for state unemployment benefits increased for a third straight week, rising 12,000 to a seasonally adjusted 500,000 in the week ended August 14, while factory activity in the U.S. Mid-Atlantic region unexpectedly declined in August to its lowest level in more than a year.

“These results did nothing to allay the rising fear that global economies risk sinking back into the red. Only Germany seems to be maintaining a positive outlook,” said Ben Critchley, sales trader at IG Index.

European shares had traded higher earlier in the session after Germany’s Bundesbank raised its forecast for the country’s economic growth this year, but the gains evaporated in the face of the U.S. economic numbers.

Financials were among the top losers, with HSBC, Barclays, BNP Paribas, Societe Generale and Credit Agricole down 1.7 to 3.5 percent.

Energy shares came under pressure as America’s economic numbers raised concerns about oil demand in the world’s largest economy. BP, Royal Dutch Shell and Total fell 2.4 to 2.7 percent.

Across Europe, the FTSE 100, Germany’s DAX and France’s CAC 40 were down 1.7 to 2.1 percent, while the Thomson Reuters Peripheral Eurozone Countries Index was down 2.1 percent.

TECHNICAL PICTURE

The Euro STOXX 50, the euro zone’s blue-chip index, fell 2 percent to 2,675.02 points. It made several attempts in recent sessions to stay above 2,738 points — its 50-percent Fibonacci retracement of a fall from a high in April to a low in May — but faced strong resistance.

The index closed below its 50-day moving average of 2,698.57 points and is expected to find some support at around 2,669.29, a 38.2-percent retracement level, and further at around 2,584.75 — a 23.6 percent retracement level.

Appetite for risky assets fell, with the VDAX-NEW volatility index jumping 8 percent. The higher the index, which is based on sell and buy options on Frankfurt’s top-30 stocks, the lower the market’s desire to take risk.

Among individual movers, Holcim tumbled 6.3 percent after the world’s second-biggest cement maker’s first-half earnings missed forecasts and it said government austerity programs would limit infrastructure spending.

Among a few gainers, Nokia rose 1.5 percent after a Finnish newspaper reported that the company could be cheap enough to become an acquisition target, and on expectations of an improving offering of smartphones.

“We are of the opinion that a broad sideways movement for the European stocks in the second half of 2010 will be the best case scenario. We do not expect a renewed uptrend in equity markets in the second half,” Greetfeld of UniCredit said.

(Editing by Will Waterman)

U.S. data drags European shares to 1-mth closing low