Low volumes, central bank wait-and-see depresses Europe stocks

Thu Aug 16, 2012 4:22am EDT

* FTSEurofirst down 0.2 percent

* China data heightens slowdown fears

* African Barrick sparks M&A interest in Gold miners

By David Brett

LONDON, Aug 16 (Reuters) - European shares edged marginally lower on Thursday in quiet trade as the recent rally lost steam waiting for central banks to act to boost growth and with China warning overnight its trade outlook for 2012 was worsening.

By 0758 GMT, the FTSEurofirst 300 was down 2.24 points, or 0.2 percent, at 1,098.50, pausing after recent gains which has taken the index close to 2012 highs.

Equity indexes have rallied strongly since late July, on expectations of further monetary stimulus from central banks after European Central Bank chief Mario Draghi pledged to do "whatever it takes" to protect the euro from Europe's sovereign debt crisis.

Chinese premier Wen Jiabao raised expectations of some form of stimulus after he said the country continued to face "headwinds" despite cooling inflation, with market participants saying an imminent cut in bank reserve ratios was likely.

"There is not much impetus (given recent gains), it is volume led and it is just a wait and see to find out the weather the central banks come up with goods, so for the time being there is not going to be much commitment or much risk taken," Yusuf Heusen, senior sales trader at IG Index, said.

This week has seen some of the lowest daily volumes on European bourses in the past six years. Wednesday was the seventh slowest day for turnover on EuroSTOXX 50 and the fourth on FTSEurofirst since 2006 - outside of the traditionally quiet year-end periods - according to Reuters data.

The recent European equities rally, driven by expectations of monetary stimulus, may wane if policy action is delayed or disappoints, leading investors to take profit on a fully valued European stock market, S&P Capital IQ said.

It said European equities' valuations look "full", with the pan-European Standard & Poor's 350 index trading at 10.8 times its expected earnings for the next 12 months versus multiples of 8.3 and 10.9 seen at the beginning and end of the period in which the ECB offered cheap loans under its LTRO programme.

Heavyweight banks waned after recent gains and weak results - second-quarter year-on-year growth contracted 31.6 percent - have taken their PE ratio up to 11.2 times, leaving the index nursing slight losses on Thursday.

Miners were the standout performers on an otherwise dull European shares index, bouncing after falls on Wednesday with Fresnillo and Randgold up as African Barrick Gold sparked M&A interest in the sector.

IG's Heusen said the main flows were coming in specific stocks with the likes of Randgold and Fresnillo , up 0.9 percent and 0.7 percent, respectively, helped higher after Canada's Barrick Gold said it is in preliminary discussions with China National Gold Group Corporation over its 74 percent stake in unit African Barrick Gold, the world's largest gold producer.

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