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Europe stocks dip on China inflation, earnings doubts

Published 04/14/2011, 04:50 AM
Updated 04/14/2011, 04:52 AM
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* FTSEurofirst 300 down 0.2 pct, key support level looms

* Japan woes weigh on technology shares

* Volatility index shows rise in risk appetite

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

By Blaise Robinson

PARIS, April 14 (Reuters) - European stocks dipped early on Thursday, as worries over Chinese inflation and doubts about the earnings season kept investors on edge, but losses were limited as a main index managed to stay above a key support level.

Tech shares featured among the top losers, with Ericsson down 2.7 percent, on lingering concerns over the impact from Japan's crisis on the sector's supply chain.

Sony Corp <6758.T> said it is mulling a two-week summer shutdown of some company premises to save energy as Tokyo and Japan's northern regions face the peak period with significantly reduced power generation capacity following last month's devastating quake. [ID:nL3E7FE08T]

At 0833 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.2 percent at 1,132.88 points. It fell to as low as 1,129.90, just above a key support level at 1,129.09 points, which represents the 50 percent retracement of the index's drop from a February peak to a March low.

Despite Thursday's retreat, investors' risk appetite was on the rise, with the Euro STOXX 50 volatility index <.V2TX> falling 2.5 percent.

Hong Kong's Phoenix TV, citing an unnamed source, said China's annual rate of inflation in March was likely to be 5.3-5.4 percent, a 32-month high. [ID:nL3E7FE0EO]

"Inflation in emerging economies has become a serious issue, as the impact from high commodity prices is stronger for those countries," said Arnaud Scarpaci, fund manager at Paris-based Agilis Gestion, which has 80 million euros under management.

Resource-related shares fell, with Rio Tinto down 1.2 percent and BHP Billiton down 1.5 percent as metal prices retreated.

Losses in the sector, however, were limited by news of Glencore's plans to raise up to $12.1 billion in an initial offering.

"The fact they are going ahead during this slight softness means they are very confident that prices will remain quite robust," IG Markets analyst Cameron Peacock said.

Around Europe, UK's FTSE 100 index <.FTSE> was down 0.3 percent, Germany's DAX index <.GDAXI> down 0.07 percent, and France's CAC 40 <.FCHI> down 0.3 percent.

Shares in Roche fell 0.9 percent after the pharmaceutical group posted quarterly sales that missed forecast, while Danone rose 2.5 percent after reporting forecast-beating sales.

"Overall, I think that quarterly results will be good. But the real focus should be on earnings from big U.S. industrial firms, which will shed light on the outlook for the U.S. economy and the Fed's next moves," Agilis Gestion's Scarpaci said.

"In terms of valuation, the European stock market is the most attractive, and its potential is underestimated at the moment. Just look at Credit Agricole, trading at a price-to-book ratio of 0.6, that's extremely low." (Reporting by Blaise Robinson; additional reporting by Miranda Maxwell in London; Editing by Mike Nesbit)

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