* FTSEurofirst 300 down 0.3 percent
* Risk fades after World Bank cuts global growth forecasts
* Banks dip ahead of JP Morgan, GS earnings
* Miners hit by macro risk, Anglo hurt by worker unrest
By David Brett
LONDON, Jan 16 European shares drifted lower on
Wednesday after caution over earnings and the global economic
outlook saw indexes stall around multi-month highs.
By 1112 GMT, the FTSEurofirst 300 was down 3.18
points, or 0.3 percent, at 1,157.04, staying near 22-month highs
but flatlining since hitting "overbought" territory just over a
The euro zone blue chip index has stalled around
18-month highs, with important data due out of China and U.S.
earnings crimping gains in the short-term.
Risk appetite waned after the World Bank cut its global
growth forecasts for 2013 in the wake of yesterday's
disappointing German GDP numbers.
"Markets are looking somewhat stretched given the recent
rally and we have turned more cautious in the short-term after
weak economic data in Germany yesterday, ahead of Friday's
Chinese GDP data and upcoming banking results in the U.S.,"
Securequity sales trader Jawaid Afsar said.
"Given the market were pushed higher by the financials we
need them to regain their poise although at the present there is
nothing to suggest that the rally is over. Numbers from the US
earning too have created an air of nervousness."
Volumes remain week as investors decide where best to put
their money to work on European stocks that have rallied 21
percent since June.
European banks, which have gained 45 percent in the
same period, fell 1.4 percent on Wednesday as rising
expectations ahead of U.S. corporate earnings from banking
heavyweights Goldman Sachs and JPMorgan left the
sector exposed to possible disappointment.
Confidence in the sector has grown after central banks
stepped up support to prevent the financial system from
collapsing, but gains have left the sector on a re-rated
price-to-earnings (PE) of 16 times and in technically
Banks such as the UK's Lloyds, Royal Bank of
Scotland and Switzerland's UBS now trade on
near 40 percent premiums to their historical PEs, according to
StarMine, leaving earnings scrambling to catch up.
Adding to concerns about over-optimistic expectations,
Societe Generale shed 3.9 percent after CFO Bertrand
Badre gave a cautious outlook message to analysts.
But Nomura reckons that while fourth-quarter results are
likely to be lacklustre, investors moving their money between
sectors could still be supportive.
"Like for much of 2012, we believe Basel 3 capital
developments should be positive, and provided banks' earnings
revisions remain less negative than the broader market ...
sector rotation could continue to underpin valuations," it said
in a note.
Macro risks dragged miners down 1.3 percent, with
Anglo American losing 3.2 percent and tumbling from
five-month highs due to worker unrest at its platinum mines,
which analysts warn could hamper efforts to reverse losses
Auto-related firms fell after data showed European
car sales plunged in December closing a year burdened by heavy
declines in all major euro zone economies.
Telecoms dipped after Deutsche Bank warned that
despite European phone companies underperforming the market by
19 percent in 2012, fourth-quarter results are unlikely to offer
many reasons to be too optimistic.
The investment bank downgraded mobile telecoms firm Vodafone
, which fell 1.8 percent, to "hold" from "buy" on
concerns over deteriorating growth and cash returns.
Deutsche prefers Dutch telecom company KPN, which
rose 2.4 percent, and Greek firm OTE, both of which
the investment bank upgraded to "buy" from "hold".
Retailers were under pressure, particularly in the
UK given HMV joined Jessops in administration this week.
Dixons Retail down 4.3 percent, continued to weaken
ahead of its trading update tomorrow, with speculation rife
among traders that a profit warning is on the cards.
The UK's no.1 retailer Tesco shed 1.2 percent with
traders attributing its decline to negative sentiment on the
stock after the supermarket retailer withdrew a number of beef
burgers from sale after samples were found to contain horse DNA
Traditional safe haven assets such as Healthcare
were the only major sector risers among European shares.