In Europe:Growth jitters hurt European stocks in worst week of 2012

23 March 2012


Fits and starts…investors are “anticipating large rebalancing outflows out of equities into fixed income.”

Concerns over the global growth outlook led to a further retreat by European equities on Friday, putting shares on course to record their biggest weekly percentage drop this year.

The pan-European FTSE Eurofirst 300 was down 0.5 percent at 1,073.69 by 1242 GMT, taking its weekly drop to nearly 3 percent.

Investor sentiment was dealt its latest blow by data on Thursday showing shrinking factory activity in China and the euro zone, a challenge to recent optimism over the economy triggered by a string of encouraging U.S. data releases.

Some strategists, however, underlined the need to put today’s decline in the context of a strong start to the year, in which the FTSEurofirst 300 has rallied about 7 percent.

“Given long-term fundamentals remain incredibly supportive, we would be advising clients to see any weakness that could develop over the next couple of weeks as an opportunity,” Henk Potts, market analyst at Barclays Wealth, said.

Technical analysis was fairly bullish. Bill McNamara, a Charles Stanley analyst, said the FTSEurofirst 300, in an uptrend which has remained intact since the lows of December, could find support at 1,070 – its 50-day moving average.

A bounce from this level could see it regain its recent highs of 1,106, he said.

Some money managers, however, were not so optimistic.

“Global markets are taking a breather, anticipating large rebalancing outflows out of equities into fixed income, because the relative performance of equities has been very significant this quarter,” Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets, said.

HARDEST HIT

Banks, recently boosted by the wave of liquidity created by central bank stimulus measures, were the hardest hit sector, with heavyweight HSBC knocking most points off the index.

Investec issued a bearish note on the bank, arguing that while it has made strategic progress with the sale and/or closure of non-strategic businesses, “the reality is that the balance sheet simply isn’t growing and margins are still falling.”

HSBC on Friday sold a stake in its Middle East Private Equity unit.

UK retailers, meanwhile, got a boost as a strong weekly update by Britain’s biggest department store chain, John Lewis, further lifted sentiment in the sector after upbeat outlook statements from two key players on Thursday.

Fashion retailer Next and supermarket chain Morrison were among the top gainers across Europe, enjoying respective gains of 2.4 percent and 1.4 percent.

UK telecoms firm BT was the standout performer, ahead 6 percent, on its plan to pay 2 billion pounds into its pension fund this month as part of a nine-year deal that results in much smaller annual cash payments.

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