U.S. data drags European shares to five-week low

By Joanne Frearson

LONDON (BestGrowthStock) – European shares hit a five-week closing low on Wednesday after lower-than-expected U.S. durable goods orders and weak U.S. new home sales data sparked worries over the prospects of a global economic recovery.

Investor sentiment had earlier been knocked after Standard & Poor’s late on Tuesday cut its ratings on Ireland and assigned the country a negative outlook, with Allied Irish Banks (ALBK.I: ) down 2.9 percent.

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top shares closed 0.8 percent lower at 1,011.35 points after being as low as 1,001.83.

“Europe is falling on the back of disappointing data out of the U.S., investors are keeping their hands dry and staying out of the game, the sentiment is pretty bad.” said Will Hedden, sales trader at IG Index.

Weaker-than-expected July orders for long-lasting U.S. manufactured goods suggested a slowdown in manufacturing and new U.S. single-family home sales unexpectedly fell in July to their slowest pace on record.

Elsewhere, Tullow Oil (TLW.L: ) dropped 4.6 percent after it said the development of its Ugandan oil fields would be delayed due to a spat between the government and the oil explorer’s former partner.

Miners featured among the biggest fallers. BHP Billiton (BLT.L: ) fell 2 percent after it said it was cautious on the short-term outlook and that the economy in China, its biggest customer, would slow from recent highs.

Other miners Anglo American (AAL.L: ), Antofagasta (ANTO.L: ), Rio Tinto (RIO.L: ) and Xstrata (XTA.L: ) slipped by between 1.4 and 3.4 percent.

SUPPORT LEVEL

The Euro STOXX 50 (.STOXX50E: ), the euro zone’s blue chip index, was down 1 percent at 2,587.4 points, just above a key support level, the 23.6 percent retracement of the index’s fall from a high in April to a low in May after piercing it earlier in the session.

“The Ireland downgrade was not too much of a surprise but it is still weighing on sentiment. The theme so far has been one of better company earnings, but that has been weighed down by uncertainty over the economy,” said Joshua Raymond, market strategist at City Index.

“There is a big focus on economic data now that we’ve come through the earnings season. People are expecting very slow growth at the minimum but there is still a potential for a double dip and investors are looking toward economic data to help paint the picture for the potential for that.”

Among individual stocks, Aggreko (AGGK.L: ) fell 5.8 percent, reversing gains from earlier in the session, as expected upgrades to full-year forecasts failed to materialize following first-half results.

However, positive earnings results did limit the FTSEurofirst index from further falls. Serco (SRP.L: ) rose 4.8 percent after the British outsourcing firm posted a 21 percent increase in half-year pretax profit.

Across Europe, the FTSE 100 (.FTSE: ) index was down 0.9 percent, Germany’s DAX (.GDAXI: ) fell 0.6 percent and France’s CAC 40 (.FCHI: ) was 1.2 percent lower.

(Editing by David Holmes)

U.S. data drags European shares to five-week low