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European shares hit one-month low in thin volumes

Published 08/24/2010, 07:52 AM
Updated 08/24/2010, 07:56 AM
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* FTSEurofirst 300 down 1.1 percent

* Commodity, banking stocks among top decliners

* Investors wait for more U.S. data for direction

* For up-to-the-minute market news, click on

By Atul Prakash

LONDON, Aug 24 (Reuters) - European shares hit a one-month low on Tuesday in thin volumes, as worries about the sustainability of the global economic recovery dominated investor sentiment ahead of more U.S. data.

Energy stocks came under intense pressure after crude oil prices fell more than 1 percent on a likely rise in crude oil inventories in the United States. Financials also lost ground on worries about a gloomier economic outlook.

At 1118 GMT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 1,024.93 points after touching 1,021.26, the lowest since late July. With many market players on vacation, volumes were just 24 percent of the index's 90-day daily average.

The index had closed higher on Monday, boosted by merger and acquisition news and stronger miners.

"There is a lot of scepticism ahead of data releases in a thin market. The sooner August is over, the better, and we can start to get people back in work and put some depth back into the market," said Ian Richards, European strategist at RBS.

"Expectations have become quite subdued on the macro front, and potentially there is a little bit of scope for some relief coming through. But we haven't got a definitive signal, and I suspect the mixed picture is going to persist into the autumn."

Upcoming economic data include Redbook's August retail sales index of department and chain store sales at 1255 GMT and U.S. existing home sales numbers for July at 1400 GMT.

"In light volumes, it's reacting to every bit of news, and the next economic news could be bad," said Justin Urquhart Stewart, director at Seven Investment Management.

The STOXX Europe oil and gas index was down 1.5 percent, while BP, Royal Dutch Shell and BG Group were down 0.8 to 2.6 percent.

MINERS, BANKS SLIDE

Miners also came under pressure as copper prices fell 1.2 percent on a stronger dollar and concerns over demand. Aluminium , nickel and zinc were also 0.6 to 2.3 percent lower.

"Whatever fire had been kicking around off the back of M&A news yesterday has certainly been extinguished," said IG Index trader Ben Critchley. "Losses are being sustained across the board, and miners are bearing the brunt of the sell-off."

Chilean miner Antofagasta fell 2.6 percent after trimming its annual production target, while Vedanta Resources fell 5.7 percent after India's environment ministry rejected a plan by the group to mine bauxite in an eastern Indian state.

BHP Billiton, Anglo American, Rio Tinto, Xstrata and ENRC fell 1.2 to 3.2 percent.

The Euro STOXX 50, the euro zone's blue-chip index, fell 1.2 percent to 2,628.00. The index could find support at around 2,585 -- its 23.6 percent Fibonacci retracement of a drop from an April high to a May low.

Financial stocks were also among the top decliners. The STOXX Europe 600 banking index was down 1.3 percent, while Barclays, Lloyds, BNP Paribas and Societe Generale fell 1.9 to 2.1 percent.

Shares in European cement and construction firms tumbled, hit by a profit warning from Ireland's CRH, which sent its stock down 15.2 percent.

HeidelbergCement was down 4 percent, while Holcim fell 2.5 percent to a 52-week low, continuing falls after last week's forecast-lagging results.

Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 were all down between 0.8 and 1.2 percent. (Additional reporting by Brian Gorman; Editing by Will Waterman)

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