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European shares fall for sixth day; miners down

Published 06/08/2011, 05:18 AM
Updated 06/08/2011, 05:20 AM
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* FTSEurofirst 300 falls 1 percent

* Miners fall on weaker metals prices

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Brian Gorman

LONDON, June 8 (Reuters) - European shares fell early on Wednesday, extending a losing run into a sixth straight session after U.S. Federal Reserve Chairman Ben Bernanke failed to offer hints of fresh stimulus for the slowing U.S. economy.

Strategists said markets could fall further, as the corporate outlook started to reflect the bleaker economic environment.

The FTSEurofirst 300 <.FTEU3> index of top European shares was down 1 percent at 1,093.02 points at 0905 GMT, and had hit its lowest since mid-March. The benchmark's 14-day relative strength index fell to 32.3, close to "oversold" territory.

Miners fell, tracking weaker metals prices. BHP Billiton , Kazakhmys and Rio Tinto fell 2.0-2.3 percent.

The Stoxx Europe 600 Basic Resources Index <.SXPP> is the worst-performing sectors this year, down 14 percent.

Wall Street finished lower on Tuesday after Bernanke said the economy has slowed and he offered no suggestion the U.S. central bank was considering fresh stimulus to accelerate growth. [ID:nN07142566]

"QE3 looks as though it has become a distant hope. The markets had pinned quite a lot on getting another form of stimulus," said Justin Urquhart Stewart, director at Seven Investment Management.

The cost of insuring Greek and Portuguese debt against default rose on Wednesday as investors fretted over the possibility of a Greek debt restructuring and due to risk aversion caused by weak U.S. data recently.

German finance minister Wolfgang Schaeuble has called for a "substantial contribution" to support Greece from holders of the country's debt, suggesting an extension of the maturities of outstanding Greek debt by seven years [ID:nB4E7G900O].

Urquhart Stewart said the Greek aid package was "a band aid", adding: "We need a bigger look at the euro structure".

Greek bank shares <.FTATBNK> fell 2.7 percent. Other banks to fall included heavyweights Deutsche Bank and Intesa SanPaolo , down 2.0 percent and 1.9 percent respectively.

Adding to the downbeat mood, German exports in April fell the most since January 2009, the Federal Statistics Office reported.

KABEL DEUTSCHLAND FALLS

Among individual shares, German cable TV company Kabel Deutschland (KDG) fell 4.7 percent, as traders pointing to unsurprising full-year earnings and a proposed dividend that was not as high as some had hoped.

"There is a lot of macro concern in a relatively quiet market, so it is not surprising to see markets come off a bit," said Richard Jeffrey, chief investment officer at Cazenove Capital Management.

"There is the potential for the market to fall further, as the earnings improvements that we have seen are going to start to slow down. We move away from risk in this environment, we are certainly not going to abandon equities, but we will reorientate towards the more defensives (such as pharmaceuticals), not chase cyclical risks."

Strategists said the economic backdrop was more than offsetting attractive valuations.

Equity valuations on Thomson Reuters Datastream showed the STOXX Europe 600 <.STOXX> carrying a one-year forward price-to-earnings of 10.4 against a 10-year average of 13.4. (Editing by Dan Lalor)

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