European Factors to Watch-Shares seen steady, find technical support

Fri Dec 13, 2013 2:40am EST

LONDON Dec 13 (Reuters) - European shares headed for a steady open on Friday, with major indexes finding some technical support after a sell-off to two-month lows on concerns the U.S. Federal Reserve may start trimming its stimulus from next week.

Futures for France's CAC and the Euro STOXX 50 were flat, while Germany's DAX futures rose 0.1 percent in early trading.

The euro zone's blue-chip Euro STOXX 50 cash index fell 0.7 percent to 2,928.12 points on Thursday, but found support at its 100-day moving average of 2,926.12. The index's relative strength index (RSI) dropped to 33, indicating it was very close to "oversold" levels.

A level below 30 suggests that an index is "oversold" and often results in a bounce back. An RSI above 70 is considered "overbought" and generally triggers a sell-off.

Analysts, however, said the market would find it difficult to rebound before the next week's policy meeting of the U.S. Federal Reserve, which could announce a reduction in its bond-buying operations that have broadly helped equities to scale new highs this year.

"The Euro STOXX 50 is now testing its 100-day moving average and it is possible that this will provide support, as it did as recently as August. The recent sell-off has left it looking short-term oversold, but not to the extent that a bounce has become inevitable," Bill McNamara, technical analyst at Charles Stanley, said.

"I would be surprised if traders committed themselves to additional long positions at this point, just a few days ahead of the Fed meeting. I wouldn't be surprised to see the index drift back to 2,900 before the buyers were tempted back in."

The pan-European FTSEurofirst 300, which fell 0.9 percent in the previous session to 1,244.66 points, a level not seen since mid-October, saw its RSI falling to 30.

Speculation of a cut in Fed's stimulus gathered further momentum after data showed on Thursday U.S. retail sales rose solidly in November, adding to signs of a strengthening economy. A reduction in liquidity is generally seen negative for equity markets.

However, the European stock market's longer-term outlook stayed bullish. A Reuters poll of over 50 strategists and forecasters, published on Thursday, predicted the STOXX Europe 600 index to climb 12 percent to a seven-year high by end-2014, while Germany's DAX was seen surging 10 percent to an historic high.

-------------------------------------------------------------------------------- > Shares frozen in Fed headlights, yen hits the skids > Wall St drops on taper anxiety; Facebook rallies > Japan's Nikkei seesaws, though weak yen offers support > U.S. bond prices slip on upbeat retail sales data > Dollar rises to five-year high against yen > Gold struggles as tapering fears, fund outflows persist > London copper eases after 5-day gain on tight supply > Brent holds above $108 ahead of Libya ports restart, Fed meeting

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