* FTSEurofirst 300 falls 0.4 percent
* Carmakers weaker after sales data
* Caution in market before Fed tapering decision
* Citi sees 25 percent upside in European stocks by 2014 end
By Alistair Smout
LONDON, Sept 17 European shares edged lower on
Tuesday, pressured by weakness in carmakers following a fall in
demand for autos last month, but the market remained close to
5-year highs after a strong rally.
Eyes were on the U.S. Federal Reserve ahead of a policy
meeting expected to confirm a slowing down of its stimulus
The car sector was the biggest faller, down 1.3
percent, after the Association of European Carmakers said
European car sales fell 4.9 percent last month.
German car parts and tyre-maker Continental AG
shed 3.5 percent, the top faller on the FTSEurofirst 300
. Traders pointed to news that major shareholder
Schaeffler had placed shares in the group worth 950 million
euros to cut debt.
"The auto data shows there's still some structural issues in
Europe ... and if the Fed announces some tapering, that will
help this profit-taking we're seeing," Joe Rundle, head of
trading at ETX Capital, said. "And then there will be a bit of a
pullback which will be a good opportunity to buy.
The Fed's committee begins a two day meeting on Tuesday
which is set to signal the start of the "tapering" process, with
asset purchases expected to be reduced by $10 billion a month.
Rundle said the market was expecting a dovish tone to the
Fed's announcement, so only the maintenance of the current pace
of purchases would see the rally continue without a pause.
The pan-European FTSEurofirst 300 was down 0.4 percent at
1012 GMT to 1,254.44, having closed at 1,258.42 in the previous
session - its highest close since June 2008.
The index surpassed its May peak for the year, reached
before Fed Chairman Ben Bernanke first indicated to the market
that the bank's equity-friendly stimulus programme would likely
be scaled back later in 2013.
The FTSEurofirst has rallied 5.2 percent since the start of
September, and 12.9 percent since June's lows made after
Bernanke's first comments on reining in the Fed's "quantitative
"We've already had the QE tapering shock back in May/June
when it was first mooted ... so markets aren't happy about QE
being reined in, but I don't think it will cause a massive
meltdown," said David Jones, chief market strategist at IG.
Citi upgraded its targets on European stocks, recommending
that investors "keep buying dips" and raising its 2014 target on
the DJ Stoxx Europe 600 to 370. Currently the index
trades at 312.55
"There may be better near-term entry points, but we see
healthy (circa) 25 percent returns to the end of 2014," analysts
at Citi said in a trading note.