European shares flat as bank selloff hits sentiment

Tue Jul 30, 2013 8:05am EDT

* FTSEurofirst 300 flat at 1,211.88 pts
    * Barclays, Deutsche Bank fall after updates
    * Upbeat comments from EDF, ITV, Weir help support index

    By Francesco Canepa
    LONDON, July 30 (Reuters) - European shares were flat on
Tuesday, as Barclays led a selloff in banks after
announcing a 5.8 billion pound rights issue and disappointing
earnings, offsetting upbeat statements from France's EDF
 among others.
    Shares in Barclays tumbled 7.2 percent in volume already
1-1/2 times their average for the past 90 days after the bank's
half-year results lagged forecasts and on news of a
larger-than-expected rights issue at a discount of 44 percent to
Monday's closing share price. 
    "Given the fairly major discount to the closing price
they're clearly looking to tempt investors," Richard J Hunter,
head of equities at Hargreaves Lansdown Stockbrokers, said.
    "What it does require is more of a leap of faith in
believing the management's statement of prospects."
    He noted the dilution effect for the bank's long-term
shareholders is mitigated by a 90 percent rally in the share
price in the past year.
    Before the rights issue was announced Barclays' shares were
trading at 0.8 times the bank's book, a discount to its peer
Lloyds at 1.1 times and Spain's BBVA at 0.9,
StarMine data showed.
    Balance sheet concerns also hit Deutsche Bank,
which fell 4.1 percent after it pledged to cut risky assets and
its quarterly profit missed expectations due to higher
litigation reserves. 
    Oil major BP also missed its quarterly profit
expectations, sending its shares down 5.1 percent.
 
    They were among the top fallers on the European FTSEurofirst
300 index, which was flat at 1,205.99 points, off an
early high of 1,211.88 points.
    The FTSEurofirst 300 had started the day on a more upbeat
tone, boosted by positive guidance comments from a number of
companies, including utility group EDF, Britain's free-to-air
commercial broadcaster ITV and engineer Weir Group
, up between 3.8 percent and 6.9 percent.
    With just over a third of the European earnings season now
behind us, 55 percent of companies that have reported so far
have met or beaten analysts' forecasts, Thomson Reuters StarMine
data showed.
    But the FTSEurofirst 300 struggled to hang onto early gains,
extending a trend that has seen it closing well off its
intra-day high in each of the past six sessions, a sign of
fading investor confidence.
    "The market is attempting to rise but we're selling off
every day," a London-based programme trader at a leading
investment bank said. "There's a raft of negative news out, from
the likes of BP and Barclays, so it's hard to see how it could
be aggressively up."
    Traders said investors were awaiting clarity on the U.S.
Federal Reserve's plan to dial back its equity-friendly stimulus
programme when Chairman Ben Bernanke speaks late on Wednesday
before committing more money to shares.
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