Falling drugmakers puncture European share rally

Thu Aug 15, 2013 7:18am EDT

* FTSEurofirst 300 down 0.8 percent
    * Astra, Glaxo hit by Morgan Stanley downgrades
    * Zurich Insurance weakens; Q2 net profit drops
    * Analysts see period of consolidation on Euro STOXX 50

    By Tricia Wright
    LONDON, Aug 15 (Reuters) - European shares gave back some of
their recent strong gains on Thursday as heavyweight drugmakers
fell, while uncertainty over when the U.S. Federal Reserve will
start cutting its stimulus hurt sentiment.
    Healthcare stocks AstraZeneca and GlaxoSmithKline
 shed 2.9 percent and 1.7 percent respectively, among the
biggest drags on the FTSEurofirst 300 in terms of points, with
traders citing downgrades from Morgan Stanley. 
    The FTSEurofirst 300 fell 0.8 percent to 1,230.19
by 1056 GMT, still within sight of its 2013 peak of 1,258.09.
The euro zone's blue-chip Euro STOXX 50, which on
Wednesday hit its highest level in two years at 2,855.89,
dropped 0.5 percent to 2,837.08 points.
    Trading volumes were thin even by August standards, given
the Assumption Day bank holiday in much of continental Europe,
with France's CAC, Germany's DAX and Britain's
FTSE 100 reaching just 20-30 percent of their 90-day
daily averages.
    But volumes were robust at about 150 percent of the daily
average in Zurich Insurance, which fell 3.7 percent
following downbeat second-quarter results. 
    The Swiss insurer said net profits fell by a bigger than
expected 27 percent, weighed by flooding in Europe, tornadoes in
the United States and meagre investment returns. It also sounded
a note of caution about reaching its targets.
    According to Thomson Reuters StarMine, 86 percent of STOXX
Europe 600 companies have announced second-quarter
results so far, of which 56 percent have met or beaten
forecasts.
    Also dampening the mood were concerns the U.S. Federal
Reserve might, from next month, start cutting back its stimulus
- one of the major drivers of this year's equity market rally.
    St. Louis Federal Reserve President James Bullard said late
on Wednesday the Fed risked pushing inflation even lower if it
tapered bond purchases too aggressively, leading some investors
to speculate a move to trim stimulus could be made within weeks.
    Against this backdrop, the market will be paying close
attention to U.S. data releases on Thursday, which include
weekly jobless claims at 1230 GMT, as well as a speech by
Bullard at 1215 GMT.
    "If we get good data... then it might boost thinking that
tapering is coming in sooner rather than later," said Chris
Beauchamp, equity analyst at IG Index, adding he remained
sceptical about the market impact of a gradual scaleback.
    Technical analysts saw scope for consolidation on the Euro
STOXX 50 which, despite Thursday's declines, is on course for
its sixth consecutive weekly gain, having risen some 14 percent
since its late June low.
    "Support at 2,775 may contain the fall... There is no sell
signal yet, but with these thin summer volumes, we think it is
wise to be quiet and wait for a better opportunity to buy," said
Valerie Gastaldy, head of technical analysis firm Day By Day.
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