Euro shares fall as euphoria fades

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Published Jul 6, 2012

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European shares fell early on Friday as fading hopes of further support from the Federal Reserve and the European Central Bank pushed investors to book more profits on five straight weeks of gains, the longest winning streak this year.

A better-than-expected private employment report on Thursday fuelled expectations non-farm payrolls data, due at 1230 GMT, may deliver a narrow consensus-beat, easing pressure on the Federal Reserve to launch new stimulus measures but failing to remove concerns about the state of the world's largest economy.

“I don't think that everybody who went flat or took some profits (on Thursday) has necessarily come back into the market just yet, meaning many are remaining on the sidelines at least till after today's non farms or even till next week when the U.S. earnings season kicks off,” Markus Huber, head of German high net-worth trading at ETX Capital, said.

“Also one good job number wouldn't necessarily mean that a new trend has been established.”

Credit Agricole revised its prediction for non-farm payrolls numbers to 135,000 from 100,000 following Thursday's data, while Goldman Sachs increased its forecast to 125,000 from 75,000. A Thomson Reuters survey published earlier this week had predicted an addition of 90,000 workers in June.

Looking at possible short-term market reaction, spread better IG Market estimates a reading above 180,000 would boost risk assets, while one below 40,000 would see them initially come under pressure, although this may give way to a reversal on the back of mounting trading floor “cries” for a third round of quantitative easing from the Fed.

By 0750 GMT, the pan-European FTSEurofirst 300 index was down 0.3 percent at 1,041.56 points after shedding 0.1 percent in the previous session, but the index was still up 2 percent for the week.

EURO ZONE PULLBACK

The euro zone Euro STOXX 50 index was 0.6 lower at 2,272.72 points, extending a technical pullback after failing to close above its 200-day moving average on Thursday.

The index has now been trading in a range roughly between 2,330 points and 2,263.08 points, the 38.2 and 50 percent retracement of the March-June down move, for five sessions and charts on the index's September futures pointed to further consolidation ahead.

“Prices have pushed below an ascending trend line,” Philippe Delabarre, a technical analyst at Trading Central, said. “Furthermore, 20-day and 50-day simple moving averages have turned down.”

A third straight session of losses eroded the Euro STOXX 50's gains for the week to a mere 0.3 percent, jeopardising its longest weekly winning streak since 2009.

The 5-week surge came as tensions surrounding the euro zone debt crisis eased throughout June following a European agreement to bail out Spanish banks, the establishment of a pro-bailout government in Greece and new EU-wide initiatives to help euro zone lenders.

But euro zone debt concerns were one again intensifying on Friday, with yields on Spanish sovereign bonds rising, after the European Central Bank failed to provide any hint about future measures to stem selling pressure on peripheral debt on Thursday, despite cutting interest rates.

Spain's BBVA and Santander, which are often traded as proxy plays for their country's sovereign debt, were among the top fallers among euro zone blue chips, shedding 4.5 percent and 2.4 percent, respectively.

Outperforming was Britain's second-biggest insurer, Aviva , up 2.7 percent, which kicked off plans to sell or close more than a quarter of its businesses by selling part of its stake in Dutch rival Delta Lloyd for 318 million pounds ($494 million). -Reuters

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