Europe shares hit as US data fuels valuation concerns

LONDON, April 3 Wed Apr 3, 2013 11:36am EDT

LONDON, April 3 (Reuters) - European shares closed provisionally lower on Wednesday as weak U.S. economic data heightened worries in the short-term that global economic growth would struggle to justify recent stock market gains.

The FTSEurofirst 300 fell 0.8 percent to 1,194.09 points, while the broader STOXX Europe 600 shed 0.8 percent, both paring the previous session's sharp gains which had taken European shares back towards pre-credit crisis highs.

The rally over the last nine months, which has been supported by unwavering central bank stimulus, has seen European shares re-rate on a price-to-earnings basis of 12.3 times, above the historical average of 12.19 times, Datastream data showed.

Data out of the United States, where hiring at companies and the pace of growth in its vast services sector slowed last month, however, cast a pall over expectations for the global growth needed to support the market's view of future corporate earnings.

"(In) the short term, the recovery in the global economy has already been priced in by the market and there's a bit of overshoot," Frederic Rollin, strategist at Pictet Asset Management, which has 46 billion euros ($59.06 billion) in equities under management, said.

"Stocks were cheap a few months ago, but after the sharp nine-month rally, they're not cheap anymore," he said.

Miners and telecoms were the sharpest fallers, down 1.8 percent and 2.1 percent, respectively, as investment banks cut their earnings forecasts across the two sectors.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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