* FTSEurofirst 300 closes down 1 pct, Euro STOXX 50 down 1.4
* World Bank downgrade to Asia forecasts hits stock markets
* Several traders favour buying on dip vs selling on rally
* Investors brace for weak Q3 European earnings season
By Sudip Kar-Gupta
LONDON, Oct 8 European shares fell on Monday
after a downbeat report on the outlook for Asian growth capped
investor sentiment around corporate earnings, and kept markets
firmly within their recent tight trading range.
Economic concerns mounted after the World Bank cut forecasts
for the East Asia and Pacific region, saying the slowdown in
China - the world's largest consumer of raw materials - could
worsen and last longer than expected.
The FTSEurofirst 300 index closed down around 1
percent at 1,101.02 points, erasing much of a 1 percent rise on
Friday after better-than-expected U.S. employment data. The
index has traded in a tight 25 point range since Sept. 26.
The euro zone Euro STOXX 50 index fell 1.4
percent to 2,496.09 points.
The World Bank's warning about the weakening Chinese economy
caused a 1 percent fall in the STOXX basic resources index
, whose constituents often rely heavily on demand from
Asian economies, such as mining and steel companies.
The STOXX European bank index also fell 1.7 percent,
as persistent worries over the euro zone debt crisis hit
Belgian bank KBC, which disappointed traders due to
a lack of development on how it will repay state aid, was the
worst performer on the FTSEurofirst 300, falling 5.2 percent.
"We have been taking profits on European equities from
September onwards. Most of the 'good news' has already been
priced in and the euro zone situation is still full of
uncertainty," said Francois Savary, chief investment officer at
Swiss bank Reyl.
INVESTORS BRACE FOR WEAK Q3 EARNINGS
Equity markets have rallied since late July, when the
European Central Bank and other major central banks pledged new
measures to fight off the effects of the economic slowdown and
euro zone debt crisis.
The FTSEurofirst 300 has risen around 8 percent since late
But it has slipped some 2 percent from mid-September, when
it hit a 14-month high, as investors have come to realise that
although the ECB has prevented a major implosion in the euro
zone, it has not yet fully resolved the region's problems.
The ECB cannot activate a government bond-buying programme
until Spain requests a sovereign aid package, but euro zone
ministers said on Monday that Spain does not need a bailout for
Italian carmaker Fiat fell 4.2 percent as it denied
a media report of a probe into its liquidity position, pushing
the STOXX European automobile sector down 2.5 percent.
Traders said stock markets were historically vulnerable to
pull-backs in the final few months of the year, and companies in
the pan-European STOXX 600 index were expected to
report a 0.7 percent decline in earnings, according to Thomson
Reuters Starmine data.
"We're coming into quarterly earnings season. We're coming
into what is typically the most vulnerable point for equities
markets," said Tavira Securities trading head Toby
However Campbell-Gray said he would rather use equity market
declines to buy stocks on the cheap than sell on the back of a
Reyl chief investment officer Savary said he would consider
buying equities if the Euro STOXX 50 fell to 2,400 points.
Berkeley Futures' head of trading Charles de Roeper felt any
pull-back on European stock markets would be limited, with
equities still offering better returns than benchmark government
bonds via their dividend yields.
"We'll continue to be range-bound, but I don't really see
much downside on this market, and we would be buyers on the
dip," said de Roeper.