March 12, 2012 / 9:06 AM / 7 years ago

European shares halt 3-day rally as miners retreat

* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 down 0.1 pct

* QE3 expectations abate following Friday’s payrolls

* Triggered Greek CDS ‘hard to price in’ -trader

By Blaise Robinson

PARIS, March 12 (Reuters) - European stocks dipped on Monday, halting a three-day rally as last week’s strong U.S. jobs data dampened expectation of further stimulus from the U.S. Federal Reserve, which holds its latest meeting this week.

Investors were also bracing for Italy’s final fourth-quarter gross domestic product, expected to fall 0.7 percent on the quarter and 0.5 percent year-on-year, highlighting the dire state of parts of the euro zone economy.

“Now that we’ve had a deal on Greece, the focus turns to other weak euro zone countries: Italy, Portugal and Spain. The overall sentiment is not necessarily bearish, but there are a few obstacles preventing indexes from topping recent highs,” a Paris-based trader said.

At 0847 GMT, the FTSEurofirst 300 index of top European shares was down 0.1 percent at 1,077.86 points, after gaining 2.6 percent in three sessions, while the euro zone’s blue chip Euro STOXX 50 index was down 0.1 percent at 2,512.50 points, after surging 3 percent in three days.

Shares in mining and steel companies lost ground along with metal prices, also hurt by nagging worries over sluggish demand from China following trade data released over the weekend.

Rio Tinto was down 0.8 percent and Xstrata down 0.6 percent.

Greece remained in focus after the International Swaps and Derivatives Association said late on Friday Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors.

“The CDS will be triggered but market players don’t know how to price the news yet. Has it been priced in yet or is this a ticking bomb?,” said Guillaume Dumans, derivatives trader and co-head of 2Bremans, a Paris-based research firm using behavioural finance to monitor investor sentiment.

Greece’s ATG index was down 1.3 percent.

European shares seen as defensive gained ground, with brewer AB Inbev up 0.9 percent, Tesco up 0.5 percent and GlaxoSmithKline up 0.5 percent.

Around Europe, UK’s FTSE 100 index was down 0.1 percent, Germany’s DAX index flat and France’s CAC 40 down 0.2 percent.

On Friday, data showed U.S. employers added more than 200,000 workers for a third straight month in February, fuelling hopes about the health of the U.S. economy and sending stocks higher.

But the initial enthusiasm faded quickly. A Reuters poll showed that economists were rethinking how aggressive the Fed needed to be in applying further monetary stimulus.

The median of forecasts from 12 primary dealers is for a new round of quantitative easing to total $525 billion in size, compared with 11 dealers’ median forecast for $600 billion in stimulus in a similar poll conducted in early February.

The Federal Open Market Committee holds a one-day meeting and issues a policy statement on Tuesday at 1815 GMT. (Reporting by Blaise Robinson; editing by Sophie Walker)

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