European shares edge further off peaks, hit by earnings

Wed Mar 13, 2013 8:49am GMT

* FTSEurofirst 300 down 0.3 pct

* Enel, Adecco, Inditex down after results

* Economic data eyed as catalyst for new peaks

By Toni Vorobyova

LONDON, March 13 (Reuters) - European equities edged lower on Wednesday, weighed down by a string of weak earnings reports and with investors looking to economic data to put fresh impetus into the rally in key stock indexes.

A subdued showing on Wall Street overnight - where the Dow Jones Industrial Average slipped off a record high to close flat after seven straight sessions of gains - and a sell-off in Tokyo added to the cautious mood in Europe.

The pan-European FTSEurofirst 300 was down 0.3 percent at 1,190.89 points by 0823 GMT, edging further away from a 4-1/2 year peak of 1,197.73 points set at the end of last week.

"People are pausing for thought, waiting to see if the growth story is there," said Neil Marsh, strategist at Newedge.

"It's a bit of a pause, hoping that the data is going to continue showing some positive trends and, if it does, I think we will continue back up."

Euro zone industrial production and U.S. retail sales figures are due on Wednesday, alongside Italy's first sale of long-term debt since Fitch cut its sovereign credit rating.

Investors are expected to demand higher yields from Rome, which will offer up to 7.25 billion euros ($9.44 billion) in four different bonds.

The Italian FTSE MIB index underperformed the broader market, falling 0.5 percent in early trade, in part reflecting concerns about the auction, but in reality more weighed down by a steep sell-off in heavyweight Enel.

Shares in the utility dropped 4.8 percent, taking 76 points off the FTSE MIB, after it posted a slump in 2012 profits and said this year's earnings will be even weaker.

Staffing firm Adecco, British security group G4S and Spanish-listed retailer Inditex also fell after reporting results.

To date, around 40 percent of European companies have missed expectations on full-year earnings, prompting analysts to downgrade 2013 forecasts by an average of 1.0 percent in the past 30 days, according to Thomson Reuters StarMine.

However, despite some steep sell-offs in individual shares, the relatively soft results season has so far failed to unseat the broad up-trend in the European equity market.

"One did not have a spectacular environment for earnings and positive surprises (in 2012), so that doesn't really worry me too much," said Gerhard Schwarz, head of equity strategy at Baader Bank.

"Certainly we will still have a shaky environment in the first quarter, but there is a decent chance that the environment for earnings will improve in the second half and that is what markets are trying to price in right now."