LONDON/PARIS, Nov 3 (Reuters): European equities retreated from a
four-week high on Monday, with a survey showing sluggish euro zone
factory growth hurting market sentiment and gas transport group Snam
leading the utilities sector lower following a gas storage ruling.
The European utilities index fell 1.7 per cent, the top sectoral decliner, on an 11-per cent drop in Snam after a regulator ruling that cut the remuneration rate for the gas storage business in 2015. Enel and Terna fell 3.7 per cent and 6.2 per cent respectively.
At 1105 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,347.11 points after rising as much as 1,355.16, the highest since early October. The index rose 1.8 per cent on last Friday after the Bank of Japan surprised global markets by ramping up its stimulus spending.
European equities gave up early gains to turn negative after a business survey showed manufacturing activity in the euro zone expanded slightly more slowly than thought last month. Germany, the region's growth engine, recorded only tepid expansion and France and Italy contracted.
"It confirms the ongoing stagnation worry for Europe and the necessity for the European Central Bank (ECB) to get on the front foot to do what it can to assist the malaise in Europe," said Lorne Baring, managing director of B Capital Wealth Management.
"Equity valuations in Europe are cheap relative to developed markets in general. However, there is no real catalyst for driving European equities. So we would see European equities as range-bound and not offering a great opportunity at the moment."
Italy's MIB index underperformed, down 1.5 per cent, on weaker utilities and as national statistics office ISTAT forecast the country's economy will contract by 0.3 per cent this year, in line with the government's most recent forecast, and grow by a weak 0.5 per cent in 2015.
Despite a rally in European stocks last week, traders and analysts remained cautious on the market's near-term outlook.
"While stocks surged on last Friday, implied volatility barely moved down, which means that there are still a lot of question marks. Investors are not completely reassured, and visibility is very poor," said Jean-Louis Cussac, head of Paris-based firm Perceval Finance.
"This is a market for hedge funds: speculation, arbitrage, algo-trading, while the flows from real buy-and-hold investors remain thin."
Monday's losses, however, were capped by a rise in airline stocks, boosted by an 8.8-per cent jump in Ryanair after it lifted its annual profit forecast almost 20 per cent on a surge in winter bookings and said it would slash fares by up to 10 per cent in the new year
The upbeat outlook boosted the shares of rivals, with easyJet up 2.4 per cent and Air France-KLM gaining 2.3 per cent.
Puma jumped more than 11 per cent, with three traders citing talk of a bid for French group Kering's 86-per cent stake in the German sportswear company. Kering and Puma both declined to comment.
The European utilities index fell 1.7 per cent, the top sectoral decliner, on an 11-per cent drop in Snam after a regulator ruling that cut the remuneration rate for the gas storage business in 2015. Enel and Terna fell 3.7 per cent and 6.2 per cent respectively.
At 1105 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,347.11 points after rising as much as 1,355.16, the highest since early October. The index rose 1.8 per cent on last Friday after the Bank of Japan surprised global markets by ramping up its stimulus spending.
European equities gave up early gains to turn negative after a business survey showed manufacturing activity in the euro zone expanded slightly more slowly than thought last month. Germany, the region's growth engine, recorded only tepid expansion and France and Italy contracted.
"It confirms the ongoing stagnation worry for Europe and the necessity for the European Central Bank (ECB) to get on the front foot to do what it can to assist the malaise in Europe," said Lorne Baring, managing director of B Capital Wealth Management.
"Equity valuations in Europe are cheap relative to developed markets in general. However, there is no real catalyst for driving European equities. So we would see European equities as range-bound and not offering a great opportunity at the moment."
Italy's MIB index underperformed, down 1.5 per cent, on weaker utilities and as national statistics office ISTAT forecast the country's economy will contract by 0.3 per cent this year, in line with the government's most recent forecast, and grow by a weak 0.5 per cent in 2015.
Despite a rally in European stocks last week, traders and analysts remained cautious on the market's near-term outlook.
"While stocks surged on last Friday, implied volatility barely moved down, which means that there are still a lot of question marks. Investors are not completely reassured, and visibility is very poor," said Jean-Louis Cussac, head of Paris-based firm Perceval Finance.
"This is a market for hedge funds: speculation, arbitrage, algo-trading, while the flows from real buy-and-hold investors remain thin."
Monday's losses, however, were capped by a rise in airline stocks, boosted by an 8.8-per cent jump in Ryanair after it lifted its annual profit forecast almost 20 per cent on a surge in winter bookings and said it would slash fares by up to 10 per cent in the new year
The upbeat outlook boosted the shares of rivals, with easyJet up 2.4 per cent and Air France-KLM gaining 2.3 per cent.
Puma jumped more than 11 per cent, with three traders citing talk of a bid for French group Kering's 86-per cent stake in the German sportswear company. Kering and Puma both declined to comment.
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