European shares retreat, led by miners

Published Dec 9, 2013

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London - European shares fell on Monday, pulled down by miners worried about demand and by concern the US will soon start to trim its monetary stimulus.

Data over the weekend showed Chinese exports beat forecasts in November, rising 12.7 percent in a sign of stabilisation in China. But imports rose 5.3 percent, short of a forecast of 7.2 percent.

The import data cast doubt on demand for miners, traders said, causing them to fall 1 percent and pressuring the FTSEurofirst 300. It was down 0.2 percent at 1,268.14 by 14:01 SA time, after rising 0.7 percent on Friday.

The euro zone's blue-chip Euro STOXX 50 fell 0.2 percent to 2,975.03 points after rising 0.9 percent on Friday.

European shares rose on Friday after a US jobs report considered solid enough to back an economic recovery but not so robust that it would prompt the Federal Reserve to scale back its stimulus programme right away.

However, a Reuters poll conducted after the US payrolls data were released showed more US primary dealers expect the Fed to start the so-called tapering in March, or sooner.

Uncertainty over when the process will begin and what it might mean for equities are likely to keep a lid on markets into year's end, even though Friday's data suggested the economy was recovering well enough to cope with the move.

“I think investors are still not quite sure what impact it could have on markets,” Keith Bowman, equity analyst at Hargreaves Lansdown, said.

Besides, European equities have posted gains steep enough to make them too expensive, according to some traders.

The Euro STOXX 50 has jumped more than 19 percent since late June, bolstered by central bank stimulus and a move out of safe bonds and into higher-yielding assets, such as stocks. That has propelled valuations above long-term averages.

The STOXX Europe 600 trades on a 12-month forward price/earnings ratio of 13.5 times against its 10-year average of 12 times, Thomson Reuters Datastream shows.

Even after Friday's strong gains, the Euro STOXX 50 suffered its worst week since August, down 3.5 percent.

Analysts saw scope for further losses, but said those could be met by year-end buying.

“I would expect that late September range area, just above 2,900, to be where the buyers are going to be waiting,” Lynnden Branigan, an analyst at Barclays Capital, said.

“I don't think we'll see new highs for the year, but I certainly think we could see it towards the upper end of the range, getting closer towards 3,100.” - Reuters

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