REFILE-Fresenius weighs on overbought European shares

Tue Feb 25, 2014 5:36am EST

* FTSEurofirst 300 down 0.5 pct

* Fresenius, FMC both tank after update

* CAC, FTSE retreat from multi-year highs

By Alistair Smout

LONDON, Feb 25 (Reuters) - European shares pulled back on Tuesday from three weeks of sharp gains, as weakness in medical group Fresenius weighed on German stocks and many regional indexes edged off multi-year highs.

Fresenius Medical Care (FMC) fell 6.9 percent after it unexpectedly forecast another decline in profit for 2014 amid budget cuts to healthcare from the United States. Shares in Fresenius, which controls FMC, fell 6.7 percent.

The two stocks accounted for more than half the drop of 0.3 percent on the German DAX, which otherwise would have outpaced peers.

Data showed that foreign trade growth had driven Europe's largest economy in the fourth quarter.

While the headline 0.4 percent increase in gross domestic product was a confirmation of an earlier flash number, the pick-up in foreign trade, which had been weak in 2013, was encouraging, traders said, while weakening domestic demand left room for further policy easing by the European Central Bank.

"Consumer demand inside Germany goes a long way to helping the inflationary environment of the EU, and we've reverted to a relatively unenthusiastic spender inside of Germany," Alastair McCaig, analyst at IG, said.

"It's more likely that we'll get more stimulus (from the ECB) if Germany also needs to boost consumption demand."

The DAX was one of the only major European indexes not to have hit multi-year highs on Monday.

The pan-European FTSEurofirst was down 0.5 percent at 1,345.96 on Tuesday, having gained 6.4 percent in the last 14 sessions to leave it at a six-year closing high on Monday and substantially overbought, with a 9-day relative strength indicator reading of 92.

If a market has an RSI above 70, it indicates it is technically "overbought" while under 30 shows it is technically "oversold".

The French CAC and British FTSE 100 closed Monday at 5-1/2 and fourteen-year highs respectively, well into overbought territory.

The French index fell 0.5 percent on Tuesday. Leading it lower was telecoms group Vivendi, which fell 2.1 percent after delivering in-line results but failing to outline any detail on its outlook for the coming year.

"The company did not provide any guidance for any of its business units and made no announcement on 2013 dividend, which in light of the possible spin-off of SFR from the group is not totally surprising but it could pave the way for some slight disappointment in terms of market reaction," Espirito Santo analysts said in a note.

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