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Cyclical stocks drag European shares lower

Published 06/06/2011, 05:38 AM
Updated 06/06/2011, 05:48 AM
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* FTSEurofirst 300 index falls 0.4 percent

* Cyclical stocks fall after Goldman downgrade

* Index approaching "oversold", technical rebound seen

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

By Joanne Frearson

LONDON, June 6 (Reuters) - European shares were lower on Monday on worries about the state of the U.S. economy following weak data, with traders saying the market was now testing chartists' support levels.

By 0859 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index of top shares was down 0.4 percent at 1,107.15 points continuing their falls from the previous session when U.S. jobs data dented recovery hopes.

"After Friday's poor economic data the pressure is on the downside for European equities," Manoj Ladwa, senior trader at ETX Capital, said. "But the index could find some support near the 1,100 mark."

"This figure is near its low of April and represents a number which the market has previously bounced off."

The index was also approaching "oversold" territory, with the 14-day relative strength index (RSI) at 31 -- 30 or below is considered "oversold" and traders saying a technical rebound was looking more likely.

Cyclical stocks were the major drag on Europe after Goldman Sachs recommended only selective exposure to cyclical stocks following a downgrading in its global growth expectations.

The STOXX Europe 600 Industrial Goods and Services index <.SXNP> fell 0.4 percent after Goldman cut it to "neutral" from "overweight", while the STOXX Europe 600 Technology index <.SX8P> lost 0.8 percent after it was downgraded to "underweight" from "overweight".

The STOXX Europe 600 Travel and Leisure index <.SXTP>, was down 0.7 percent after the broker also cut it to "underweight" from "overweight".

Airline stocks featured among the worst performers within this sector after the International Air Transport Association (IATA) cut its forecast for airline profits this year by more than half. [ID:nL3E7H605H]

IAG , Lufthansa and Air France slipped 0.9 to 1.2 percent.

CAC FALLS

The French CAC <.FCHI> index was down 0.8 percent underperforming other major European exchanges, with the German DAX <.GDAXI> and Britain's FTSE 100 <.FTSE> falling 0.5 percent and 0.4 percent respectively.

Traders said French banks that had exposure to Greece were the main drag on the CAC, with Societe Generale , Credit Agricole and BNP Paribas down 1.6 to 2.6 percent.

On Friday, the European Commission, the European Central Bank and the International Monetary Fund, said Greece had made considerable progress toward repairing its finances.

But traders said there was a lot more detail and legislation to go through until the situation was resolved and there were still worries over other peripheral euro zone countries.

"It is risk off because of Greece and worries about contagion remain critical, there is little detail and it all still has to go through a legislation process," Atif Latif, director of trading at Guardian Stockbrokers. "There could be problems." (Editing by Greg Mahlich)

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