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European shares retreat ahead of US GDP, Bernanke

Published 08/27/2010, 04:54 AM
Updated 08/27/2010, 04:56 AM

* FTSEurofirst 300 fall 0.7 pct; set for 3rd week of losses

* Investors await U.S. GDP figures, Bernanke speech

* Technical outlook bearish; oils among top decliners

By Atul Prakash

LONDON, Aug 27 (Reuters) - European shares slipped in early trade on Friday and were on track for a third straight week of losses as investors remained concerned about the pace of economic recovery after recent grim macroeconomic data.

The market awaited the second estimate of U.S. GDP for the second quarter and a speech by U.S. Federal Reserve Chairman Ben Bernanke, who is likely to signal his views about the uncertain prospects for the world's biggest economy.

By 0827 GMT, the FTSEurofirst 300 index of top European shares was down 0.7 percent at 1,013.26 points after closing 0.9 percent higher in the previous session.

"We are going to have a bumpy couple of weeks, may be even months ahead. We need to have some clear evidence for the U.S. economy to turn the corner to get people to look at the equity market again," said Franz Wenzel, strategist at AXA Investment Managers in Paris.

U.S. economic growth between April and June would likely be much weaker than initially thought, the GDP report, which is due at 1230 GMT, is expected to show.

Financial stocks were among the top losers, with the STOXX Europe 600 banking index falling 0.9 percent. Barclays, Royal Bank of Scotland, Societe Generale and Natixis fell 1.3 percent to 1.7 percent.

Commerzbank, Germany's second-biggest lender, fell 3.3 percent after German business daily Handelsblatt cited financial sources as saying the company was planning a capital increase of at least 5 billion euros ($6.37 billion) this fall.

A spokesman for the lender said on Friday that "there are no concrete plans yet." Energy shares also lost ground as crude oil prices fell 0.3 percent on concerns about energy demand in the U.S. The STOXX Europe oil and gas index fell 1.1 percent, while BP, BG Group and Total fell 0.8 percent to 2.3 percent.

Tullow Oil fell 4 percent after two Ugandan newspapers said the Ugandan government had taken away the UK company's exploration licence. Tullow Oil declined to comment.

BEARISH TECHNICALS

The Euro STOXX 50, the euro zone's blue-chip index, fell 0.6 percent to 2,592.36 points and is down 1.9 percent so far this week.

"It looks bearish, but still has got plenty of support at lower levels," said Phil Roberts, technical analyst at Barclays Capital. He saw support at 2,534 points and further at 2,500.

"Longer term, it looks like it is still in a corrective process after a rally (from April 2009 to January 2010) and risks are for a move down towards 2,400," Roberts said.

On the upside, the index faces resistance at 2,670 points, its 38.2 percent retracement level and again at its 50-day moving average of 2,688 points.

Among individual stocks, Swiss drugmaker Novartis AG gained 0.5 percent. It received U.S. approval for a new treatment of high blood pressure, broadening the use of Tekturna, the successor to the group's best-selling drug, Diovan.

Spain's Iberia posted a narrower than expected first-half operating loss as improving business travel and air cargo demand eased the negative impact of a volcanic ash cloud in April. But its shares fell 0.6 percent tracking the broader market. (Editing by Sharon Lindores)

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