London - European shares inched down on Wednesday, steadying after the previous session's steep losses, with Asia-focused bank Standard Chartered leading the decliners after it warned its profits will likely fall.
Shares have been weakening on expectations the US Federal Reserve will soon start to scale back its bond-buying programme. Investors realise the central bank will start reducing stimulus at some point, but the timing remains open to question.
Standard Chartered dropped 6.3 percent in robust trade as it warned that profit would probably drop this year after Asian growth slowed over the past five months.
“Today's below expectation results will likely lead to downgrades of over 5 percent to earnings forecasts for 2013 and potentially 2014,” Jonathan Jackson, head of equities at Killik & Co, said.
“We prefer HSBC for its more diversified earnings stream and higher dividend yield.”
Trading volume in Standard Chartered was robust, at more than twice the 90-day daily average by 13:36 SA time, against the broader FTSEurofirst 300 at a third.
The FTSEurofirst 300 was off 0.3 percent at 1,277.18 points, having dropped 1.5 percent to 1,280.85 points on Tuesday.
That was its lowest close since October 23 and its most severe one-day percentage drop since August 27.
The euro zone's blue-chip Euro STOXX 50, meanwhile, was 0.2 percent weaker at 3,008.53 points.
The economic picture in Europe was mixed, with Germany reporting its private sector grew at its fastest rate in nearly 2-1/2 years in November, while a recovery in the broader euro zone private sector lost momentum. Italian and French service sectors fell back into contraction.
Before Friday's key report on US jobs in November, the market will have a raft of US data to deal with on Wednesday, including the November ADP employment report at 15:15 SA time and both the ISM non-manufacturing index and new homes sales for September and October at 17:00 SA time.
Those releases could give some indications as to when the Fed will start cutting its bond-buying programme, which has supported the rally in stocks. It has said it will start the process when certain economic data releases meet its targets.
Robust manufacturing data on Monday re-ignited speculation the Fed could start the process before year-end.
That prompted a sharp sell-off in equities on Tuesday, but traders say markets may not yet be prepared for an imminent reduction of stimulus.
“My gut feeling is that we will probably get a reasonably positive set of jobs figures come Friday, and if anything that might just heighten fears that we could see a December taper,” said Keith Bowman, an equity analyst at Hargreaves Lansdown.
“We should still get a little bit of downside.”
Craig Erlam, analyst at Alpari, is bearish on the technical outlook for European indexes, although notes that there are some big support levels approaching on the Euro STOXX 50 - at 3,000, previous support, then at 2,977, and 2,955. - Reuters