Reuters: Market News: European shares slide on US, China growth worries

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European shares slide on US, China growth worries Apr 10th 2012, 08:32 Tue Apr 10, 2012 4:32am EDT * FTSEurofirst sheds 1.2 percent * Weak US jobs data, mixed China data dents growth hopes * Automakers fall as demand outlooks grows murkier * Randgold bucks weak trend after Mali settlement By David Brett LONDON, April 10 (Reuters) - Top European shares fell sharply early on Tuesday as downbeat U.S. jobs data and mixed trade figures from China soured the global growth outlook ahead of the start of the earnings season in the United States. At 0804 GMT the FTSEurofirst 300 index was down 12.45 points, or 1.2 percent, at 1,039.79 after reopening for the first time since Friday's weak March U.S. payrolls numbers. The Euro STOXX 50 fell 1.4 percent to 2,358.16 to threatened a key support level around 2,352 -- the 61.8 percent Fibonacci retracement of a rally that began in mid-December. But according to its 14-day relative strength index, the Euro STOXX 50 has slipped into oversold territory that could provide support along with the trend line that started in September. The catalyst for falls on Tuesday was the payrolls data, which added to a run of U.S. indicators that has taken the edge off the first quarter's brisk stock rally. Ian Williams, equity strategist at Peel Hunt, said the non-farm jobs numbers confirmed that the Federal Reserve had been correct to remain cautious about the pace and the sustainability of the recovery in the world's biggest economy. "Although that could be interpreted as increasing the likelihood of sustained Fed support, the risk-off mood that prevailed in the early days of the second quarter seems likely to persist for now," he said. The Euro STOXX 50 volatility index, Europe's main barometer of anxiety, surged 12 percent to a five-week high. CHINA SLOWDOWN Adding to growth worries, data showed China's imports grew a less than expected in March year, highlighting concerns about the pace of a slowdown in domestic demand from the world's most voracious consumer of basic resources. Businesses relying heavily on exports to emerging economies, such as automakers, were among the biggest fallers in Europe. Fiat shed 3.4 percent after Brazil, a key market, said it had no plans to offer further incentives for automakers, according to reports. Miners also fell, along with commodity prices. Randgold Resources bucked the trend, rebounding 9.9 percent as the gold miner welcomed the political settlement agreed in Mali, home to two thirds of the miner's production, and said the disruption sparked by a coup had not significantly affected its operations there. BANK FUNDING STRAINS Banks weakened as investor appetite for risk fell. The sector, which led the market higher at the start of 2012, has succumbed to profit taking as the positive effects of a liquidity boost provided by global central banks at the end of 2011 has begun to wear off and investors have refocused on Europe's long-term debt problems. Spanish debt yields continued to rise as the euro zone periphery struggles to meet deficit reduction targets, and Italian yields did likewise after the country's banks borrowed heavily from the European Central Bank in March. Portuguese banks' dependence on the ECB also rose, pushing above the August 2010 peak in another sign of increasing tensions in funding markets. Further pressure on the banks came from the U.S. Federal Reserve Chairman Ben Bernanke who said on Monday financial institutions needed to have more capital at hand in order to ensure the financial system is stable. With pressure on the banks to shore up their balance sheets, lending and growth continues to be a concern. That makes the U.S. reporting season that begins with Alcoa after this evening's closing bell of even greater interest than usual to investors. Against the backdrop of waning global demand and European debt worries, analysts do not expect the results season to provide much cheer for investors. JPMorgan said it is staying cautious in the near term on equities due to the loss of macro momentum. "The first-quarter reporting season is seen by many as a potential catalyst for improving market sentiment. We disagree," said Mislav Matejka, equity strategist at JPMorgan. Link this Share this Digg this Email Reprints

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