European shares retreat from highs

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London - European shares fell on Wednesday, with Hugo Boss putting pressure on the market after Permira placed a 5.6 percent stake in the company and Ahold slipping after its first-quarter operating profit came in below expectations.

Shares in fashion group Hugo Boss fell 2.4 percent to 103.35 euros, one of the biggest drags on the pan-European FTSEurofirst 300 index, after a source familiar with the transaction said the shares were placed with institutional investors at 101.50 euros apiece.

And Dutch supermarket chain Ahold slipped 2.5 percent after its operating income, adjusted for one-off factors, dropped 6.2 percent as margins fell in the United States and the Netherlands, its main markets.

The two companies put pressure on the broader market, with the FTSEurofirst 300 index of top European shares falling 0.2 percent to 1,375.45 points by 10:15 SA time, after hitting its highest level in more than six years on Tuesday.

“The market has some potential to rise further in the summer after recent gains, but equities are clearly not that cheap anymore,” Gerhard Schwarz, head of equity strategy at Baader Bank in Munich, said.

“We might face some headwinds going forward as earnings expectations for the second half are too ambitious and could be revised down and economic growth might moderate next year.”

Germany's DAX fell 0.1 percent after setting another record high at 9,957.87 points early on Wednesday.

Analysts said that in the near term, shares could bounce back on expectations of further improvements in economic indicators from the United States and Europe and on hopes of more policy easing by the European Central Bank (ECB).

Data on Tuesday showed that orders for long-lasting US manufactured goods unexpectedly rose in April, home prices advanced more than expected in March and consumer confidence rose to near its highest since 2008.

Investors also expect the ECB could cut interest rates at its June 5 policy meeting.

ECB President Mario Draghi said on Tuesday the central bank was aware of the risks from prices remaining too low for too long and it was equipped to get inflation back to its target again.

“Investors are banking on the hopes that the ECB president will initiate some sort of help to fight the deflation and boost the economic growth in the region, but at the same the threat of no action by the ECB remains as real as it can be,” Naeem Aslam, chief market strategist at Ava Trade, said in a note.

“But, for the time being, a sharp sell off in the equity markets does not seem to be an option as traders keep moving the markets from strength to strength.”

On the positive side, Telecom Italia rose 3.7 percent after Goldman Sachs raised its price target for the stock to 1.50 euros from 0.95 euros and retained its “buy” rating, traders said. - Reuters



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