European shares slip after weak UK and U.S. data

Fri Jan 18, 2013 5:29pm GMT

* FTSEurofirst 300 down 0.2 percent

* UK, US data offsets China GDP growth

* Retailers dented by consumer sentiment data

* Mediaset 9-month highs triggers short covering

By David Brett

LONDON, Jan 18 (Reuters) - European shares slipped on Friday as disappointing economic data in the UK and U.S. dampened sentiment, but technical support and on-going central bank stimulus measures kept indexes at multi-month highs.

The FTSEurofirst 300 index closed down 1.9 points at 1,163.64 points.

The outlook for global growth took a knock after a shock fall in UK retail sales cast a pall over 2013 expectations, while in the United States consumer sentiment unexpectedly deteriorated for a second straight month to its lowest in over a year.

That helped drag retailers lower and took some of the shine off gains of basic resource stocks, which had earlier risen after data in China showed economic growth accelerated for the first time in two years in December.

"We have had the good China data and reasonable earnings in the U.S. which has been quite supportive. I think the markets can push higher but we are running out of catalysts," Guy Foster, head of portfolio strategy at Brewin Dolphin, said.

Momentum has stalled on European indexes of late.

The FTSEurofirst 300 has traded in a tight 10-point range since hitting near two-month highs on Jan. 3, while the UK blue chip index is at four-and-a-half year highs, but equity markets have built in some technical and fundamental support of late.

"Some key levels are holding, namely 6,150 on the FTSE ," Atif Latif, director at Guardian Stockbrokers, said.

"If central banks continue to add stimulus then equity markets remain, for the moment, in an uptrend. Experience, however, tells us that we are due a correction imminently and we await for the move down before moving into buying bias on existing positions," he said.

The EuroSTOXX 50 index of euro zone blue chips has risen some 12 percent since mid-November, but with concern over a reversal building and volatility on the EuroSTOXX 50 - a crude barometer of risk aversion - near five-year lows now might be the time to buy some cheap protection against falls.

Strategists at BNP Paribas recommend buying an at-the-money February put on the EuroSTOXX 50 and selling the equivalent contract on U.S. S&P 500 or on the German DAX, where they expect economic growth - and thus corporate earnings - to hold up better.

European companies start reporting next week. They are expected to post a 1 percent year-on-year drop in fourth-quarter earnings, on average, against a forecast for 2.1 percent for U.S. peers, according to Thomson Reuters StarMine.

Publisher Pearson, however, rose 0.5 percent, helping the media sector up 0.9 percent, ahead of its trading update on Monday.

Traders also cited reports in the Daily Telegraph that the Financial Times, which is owned by Pearson, is being touted for sale by investment banks including Nomura and Bank of America Merrill Lynch for up to 1 billion pounds ($1.60 billion), as being supportive of the share price.

Italy's Mediaset, meanwhile, rallied 5.8 percent with traders citing short covering on Italy's biggest private TV broadcaster after recent gains - the stock hit 9-month highs - triggered stop losses.

Shares worth some 8 percent of Mediaset's market capitalisation were out on loan at the market close on Jan. 16, Markit data shows, making the media group the fourth most shorted stock on Italy's blue-chip index.