GERMANY: Traders are pictured at their desks in front of the German
share price index DAX board at the Frankfurt stock exchange Friday. —
Reuters Photo
PARIS, Nov 28 (Reuters): European shares fell on Friday morning, retreating for the first time in six sessions as a further drop in crude oil prices kept the pressure on energy shares and revived fears of deflation in the euro zone.
BP shed 3.5 per cent, Total sank 4.1 per cent, Seadrill lost 4.6 per cent and Saipem slipped 4.1 per cent.
A number of oil services firms including Seadrill have been forced to scrap their dividends as the sector struggles with the drop in crude prices, which is prompting oil majors to accelerate cost cutting efforts.
"At $72 a barrel, we're well below the pain threshold for many companies in the sector, as well as many exporting countries such as Iran, Libya or Russia," said IG France's chief market analyst, Alexandre Baradez.
"However, it's a pretty good news for the energy-hungry sectors such as airlines."
Jet fuel, derived from crude, accounts for around a third of the operating costs of airlines.
Shares in Air France surged 8 per cent while Lufthansa rose 4.3 per cent and Ryanair added 3.5 per cent.
At 0900 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 per cent at 1,385.05 points.
The benchmark index had risen nearly 15 per cent since a low hit in mid-October, lifted by the prospect of further measures from the European Central Bank to ward off the risk of deflation.
"The outcome of the OPEC meeting and the slump in oil prices that followed brings huge uncertainties," said Naeem Aslam, Chief Market Analyst at Avatrade, in Dublin. "It's definitely bad news for Draghi because it will prevent any rebound in inflation."
Brent crude prices were down nearly 1 per cent to below $72 a barrel on Friday, adding to the previous session's plunge when OPEC decided not to cut oil output to support prices after Saudi Arabia blocked calls from poorer OPEC members for output reductions. Brent has tumbled nearly 40 per cent since June.
On the positive side, a survey of Japan-based fund managers, polled between Nov. 17 and 21, showed on Friday that allocations to euro zone equities had increased to 17.3 per cent in November from 13.8 per cent in October, amid expectations of more stimulus from the European Central Bank.
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