European shares slip on technical selling, growth worries

Fri Apr 5, 2013 8:16am EDT

* FTSEurofirst 300 index falls 1.6 percent

* Germany's DAX falls sharply on technical factors

* Growth, bird flu concerns hit sentiment

By Atul Prakash

LONDON, April 5 (Reuters) - European shares fell to a one-month low in choppy trading on Friday, with selling aggravated by a sharp fall in the German DAX index and last-minute concerns that U.S. jobs data could disappoint.

Worries that U.S. non-farm payrolls data would be worse than expected helped push the DAX below two important technical levels, triggering "stop losses" - an order placed by investors to sell a security when it reaches a certain price.

The index fell nearly 100 points in less than five minutes after it touched 7,800, a 50-day moving average. It then dropped below 7,775, a longer-term support line in place since June, triggering more selling. At 1128 GMT, the DAX was down 1.8 percent at 7,680.39 points and analysts said it could head lower still.

"Further declines are likely. A correction is starting now, suggesting a test of its horizontal support at around 7,560," Roelof-Jan van den Akker, senior technical analyst at ING Commercial Banking, said.

He said the German benchmark could even fall towards 7,390 in the near term, its 200-day exponential moving average.

The FTSEurofirst 300 was down 1.4 percent at 1,164.53 points at 1211 GMT, after falling to a one-month low of 1,161.38. The Euro STOXX 50 Volatility Index, a key gauge of investors' fears, surged 7.4 percent to a one-month high.

Investors remained nervous ahead of the release of widely watched U.S. jobs data. Earlier surveys suggested that employers added 200,000 jobs last month, but recent weak data, including Thursday's disappointing unemployment benefit claims numbers, have raised doubts about March non-farm payrolls, due at 1230 GMT.

"Recent weakness in global economic data has certainly spooked investors and prompted them to stay very cautious. If U.S. jobs data turns out to be weaker than anticipated, it would certainly add to already jittery sentiment," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

Some analysts feared the number could come in as low as 160,000-170,000, putting further pressure on the market.

"There is a lot of uncertainty surrounding the non-farm payrolls. We are going to see some choppy market (trading) from now until the data. People are definitely more pessimistic now," Craig Erlam, analyst at Alpari, said.

ASIA JITTERS

The market was also unsettled by the situation on the Korean peninsula after North Korea asked Russia to consider evacuating staff from its embassy in Pyongyang because of increasing tension on the peninsula.

European airlines stocks also put downward pressure on the market, hit by concerns that the spread of bird flu in Asia could hurt air traffic.

The STOXX Europe 600 Travel and Leisure index fell 3.2 percent, the worst-performing European sector, with airline stocks falling more than others in the sector on concerns about the spread of bird flu in China.

Air France-KLM, Lufthansa, IAG and Ryanair fell by between 3.2 and 6.1 percent. British budget carrier easyJet fell 6.7 percent despite saying that it would nearly halve its first-half loss.

"If the bird flu situation escalates, it could cause a further pullback in some of the travel-orientated names," James Butterfill, global equity strategist at Coutts, said.

"We do have a defensive bias. We have been looking to buy into cyclicals because we think that they are undervalued at the moment, but we haven't seen enough correction yet to warrant it," he said, adding a fall in the Euro STOXX 50 to about 2,500 might prompt him to buy cyclicals.

The euro zone's blue chip index fell 1.5 percent to 2,582.30.

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