Healthcare hit as European stocks end winning run

Thu Dec 13, 2012 1:16pm EST

* FTSEurofirst 300 falls 0.4 pct to 1,134.86 points

* Euro STOXX 50 falls 0.1 pct to 2,627.66 points

* Some traders looking to cash in on shares before year-end

* Reuters poll forecasts gains for European shares in 2013

By Sudip Kar-Gupta

LONDON, Dec 13 (Reuters) - European shares slipped from 18-month highs on Thursday, led by a fall in heavyweight healthcare stocks, after uncertainty over U.S. budget talks prompted investors to cash in an eight-session winning streak.

Although many traders were looking to book profits by selling shares before the end of 2012, a Reuters poll forecast further gains for European equities in 2013, on prospects of an improvement to the area's economy and its sovereign debt crisis.

The pan-European FTSEurofirst 300 index closed down 0.4 percent to 1,134.86 points, just off the multi-month high of 1,141.32 points reached earlier this week.

The euro zone's blue-chip Euro STOXX 50 index also edged down by 0.1 percent to 2,627.66 points, having hit an intraday 2012 high of 2,638.64 points earlier in the session.

Investors said a stalemate in talks among U.S. politicians over reaching a deal to avoid growth-curbing austerity measures - referred to as the U.S. "fiscal cliff" - was the main reason for the fall in equity markets.

Although most traders expect a deal to be reached on the "fiscal cliff" - a looming combination of government spending cuts and tax rises that could hit the U.S. economy next year - the lingering uncertainty pegged back stock markets.

"The market is very defensive ahead of the fiscal cliff problems, which will no doubt get sorted but it's a question of when," said Berkeley Futures associate director Richard Griffiths.

"Any reasonable rally just gets sold into. People are playing it safe before the year-end," he added.

HEALTH STOCKS WEAKEN

Healthcare stock AstraZeneca fell 2.8 percent to take the most points off the FTSEurofirst 300 index, after a clinical study showed that one of its arthritis treatment drugs was inferior to that of a rival.

The fall in AstraZeneca also dragged down the shares of rivals such as GlaxoSmithKline and Roche, which declined by between 0.7-0.8 percent.

Shares in Swedish carmaker Volvo also fell by around 4 percent to make them the worst-performing stock on the FTSEurofirst 300, after French rival Renault sold a stake in the company.

However, the stock markets of Italy and Spain - whose recession-hit economies have put them at the forefront of the euro zone's sovereign debt crisis - outperformed by rising.

Italy's FTSE MIB index, which has fallen over the past week after Prime Minister Mario Monti said he would resign, rose 0.6 percent while Spain's IBEX equity index advanced by 0.4 percent.

Analysts have said that pledges by the European Central Bank (ECB) to take new steps to protect the euro currency from the debt crisis have reduced the risk of a major collapse in the bond or stock markets of countries such as Spain and Italy.

This was also one of the main reasons why the Reuters poll showed that European stocks were seen rising further in 2013.

The Reuters poll forecast the Euro STOXX 50 ending 2013 at 2,883.50 points, a level last seen in the first half of 2011.

The broader STOXX 600 index was also expected to rise some 10 percent to end 2013 at 305 points, taking it to five-year highs.

"Further measures are required but we believe the foundations that are required to improve competitiveness are being put in place," said Joel Copp-Barton, European Product Director at fund management firm Invesco Perpetual.

However, EGR Broking managing director Steven Mayne said that despite the positive outlook for 2013, many traders would wait until January and a resolution to the U.S. "fiscal cliff" before buying new stakes in European equities.

"It's a dangerous time of the year to open up new positions," he said.

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