European shares edge lower, all eyes on Spain

Wed Oct 3, 2012 8:02am EDT

* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 down 0.1 pct
    * Spanish stocks under pressure on bailout uncertainties
    * U.S. jobs data seen as potential positive catalyst

    By Blaise Robinson
    PARIS, Oct 3 (Reuters) - European stocks edged down on
Wednesday, adding to the previous session's losses, weighed down
by doubts about whether Spain will soon request a bailout and
further signs of a slowdown in China and Europe.
   At 1126 GMT, the FTSEurofirst 300 index of top 
European shares was down 0.1 percent at 1,100.73 points in
relatively low volumes.
    Spanish stocks were among the biggest losers, with BBVA
 down 1 percent and Banco Santander down 0.9
percent.
    Late on Tuesday, Spanish Prime Minister Mariano Rajoy said a
request for a bailout was not imminent, denying reports that the
country was set to officially ask for help at the weekend.
 
    European stocks have surged since late July, when European
Central Bank head Mario Draghi said he was ready to do "whatever
it takes" to save the euro, later announcing a bond-buying
programme to cut the borrowing costs of struggling states.
   The Euro STOXX 50 surged as much as 22 percent,
hitting a six-month high by mid-September, but has since lost
steam, halted by a raft of gloomy macro data as well as doubts
over whether Spain is willing to request a bailout, a condition
for the ECB to start buying the country's bonds.
    "The question is not if there will be a bailout, but when it
will happen," FXCM analyst Nicolas Cheron said.
    "Investors seem confident that a bailout would ease the
tensions, but I think on the contrary that it will be a real
sword of Damocles. The risk is to see it trigger social unrest
in Spain and maybe other countries. I recommend using all the
rebounds to sell," he said.
    Grim data also rattled investors on Wednesday, with      
figures showing China's services sector slowed last month to its
lowest level in nearly two years fuelling worries that a drop in
manufacturing has started to spread to other areas of the
world's No. 2 economy. 
    In Europe, purchasing managers indexes (PMIs) signalled the
euro zone probably slipped back into recession in the third
quarter. 
    Energy shares were among the top losers, falling along with
oil prices on mounting worries over global demand, with Total
 down 0.6 percent and Repsol down 0.8 percent.
    "China's exports have been suffering, and at the same time
domestic demand is relatively weak. All these emerging countries
which used to lead the global economy are losing steam," Saxo
Banque senior sales trader Alexandre Baradez said.
    "The market is stuck in a consolidation phase and to get out
of it we need a catalyst."
    Investors were looking ahead to U.S. ADP jobs data, due at
1215 GMT on Wednesday, for clues on Friday's all-important
monthly payrolls data.
    Around Europe, the UK's FTSE 100 index was up 0.1
percent, Germany's DAX index up 0.1 percent, and
France's CAC 40 was down 0.2 percent.
    The blue chip Euro STOXX 50 index was down 0.1
percent, at 2,492.45 points, slipping back below a key support
level at 2,495.66, the 23.6 percent Fibonacci retracement of the
'Draghi effect' rally started in late July.
    "A downward channel is taking shape," Aurel BGC chartist
Gerard Sagnier said.
    "The index could retrace another 4 to 5 percent of the
summer rally. We have a 'reduce' recommendation on the short
term, and people should take advantage of the technical
rebounds," he said.
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