European shares fall for 3rd day, focus on U.S.

Fri Nov 9, 2012 9:51am GMT

* FTSEurofirst 300 index falls 0.2 percent

* Cyclicals lead sell-off; insurers, miners down

* Novo Nordisk jumps after drug approval

By Atul Prakash

LONDON, Nov 9 (Reuters) - European shares fell in morning trade on Friday, led lower by growth-linked stocks hit by mounting concerns about a U.S fiscal crisis that could threaten growth in the world's biggest economy .

Adding to poor sentiment were worries about Greece as it inched towards securing its next tranche of urgently needed international aid. The country will vote to approve its 2013 budget on Sunday, after Wednesday's tight vote in favour of a 13.5 billion euro austerity package.

The FTSEurofirst 300 index of top European shares fell for a third straight session and was down 0.2 percent at 1,096.13 points by 0942 GMT.

"Concerns about the U.S. 'fiscal cliff' and the situation in Europe have been prompting investors to take some risk off the table. We see a further downside potential for the market in the short-term, but that could also represent interesting buying opportunities," James Butterfill, global equity strategist at Coutts, said.

"We are sticking to companies with strong balance sheets and non-Europe revenues. In Europe we focus on sectors such as pharmaceuticals and telecoms. We own shares in Vodafone, GlaxoSmithKline and Shire."

The United States faces a potential $600 billion in automatic spending cuts and tax rises next year, which could drive the country back into recession.

The healthcare index, generally seen as a defensive play, rose 0.6 percent to top the gainers list, helped by Novo Nordisk, which jumped 9.4 percent after an advisory panel to the U.S. Food and Drug Administration late on Thursday voted to recommend approval of its long-acting insulin degludec.

However, cyclical shares led the sell-off, with European insurers falling 1.2 percent, banks down 0.9 percent and miners slipping 0.8 percent on worries about the U.S. fiscal situation.

Exane BNP Paribas said in a note that conditions existed for a recent rally in equity markets to resume once the U.S. resolved its fiscal dispute, as valuations and loose monetary policy were set to continue in the medium term.

"In the very short term, markets may continue to lack clarity about the US fiscal outlook, as we do not expect a deal before mid-December at the earliest," analysts at BNP Paribas said in a note.

Among individual movers, French bank Credit Agricole fell 6.4 percent after reporting a steeper-than-expected 2.85 billion-euro loss, hit by an exit from Greece and a series of other write-downs.