Weak banks and chemicals weigh on European shares

Fri Feb 15, 2013 9:20am GMT

* FTSEurofirst flat at 1,164.02 points

* Euro STOXX 50 slips 0.1 pct

* Fall in banks and Johnson Matthey weigh on equities

* PPR surges after results beat forecasts

By Sudip Kar-Gupta

LONDON, Feb 15 (Reuters) - Weaker financial and chemicals stocks weighed on European markets on Friday, with traders expecting declines over the next month after a strong January rally.

The FTSEurofirst 300 index was broadly flat at 1,164.02 points, while the euro zone's blue-chip Euro STOXX 50 index slipped 0.1 percent to 2,631.53 points.

Many investors and traders have been forecasting a weaker equity market in February and March due to lingering worries over the euro zone's sovereign debt crisis, before equities pick up again in April.

The FTSEurofirst 300 has risen around 3 percent since the start of 2013, having gained more than 20 percent from a low point last June, buoyed by a European Central Bank (ECB) pledge of new measures to tackle the region's economic problems.

However, signs that Europe's economic woes have not been resolved were highlighted on Thursday by data that showed a contraction in the euro zone economy.

HED Capital head Richard Edwards said he felt the export-led German economy remained best placed to deal with the weak macroeconomic backdrop.

Edwards backed using any stock market weakness to buy positions on Germany's benchmark DAX equity index while selling the Spanish, Italy and French equity markets, with Spain and Italy still hit hard by the region's debt problems.

"There's more growth going on in the United States than in Europe. We would use any weakness to buy Germany while selling Italy, Spain and France," he said.

FINANCIALS FALL

Financial stocks fell, with Germany's Commerzbank retreating by 0.1 percent after warning it expected an increase in loan loss provisions.

The STOXX Europe 600 financial services index fell 0.5 percent while the STOXX Europe 600 banking index slipped 0.2 percent.

Chemicals group Johnson Matthey was among the worst performers on the FTSEurofirst 300, falling 2.5 percent after saying it expected to suffer a loss after failing to renew a deal with Anglo American Platinum.

However, a 5.4 percent surge in French luxury goods group PPR prevented equity markets from falling further after it reported forecast-beating results.

Terry Torrison, managing director at Monaco-based McLaren Securities, said any fall in equity markets this month would be relatively short-lived and limited.

Torrison said the broader trend remained one of investors putting money into equities rather than cash or bonds, due to the better returns on offer from stock dividends.

"There is some scepticism out there that February is not going to be a great month, but I think there's more room to run. The momentum is still intact," said Torrison.

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