* FTSEurofirst 300 up 0.2 percent
* Charts show index has reached 'oversold' levels
* Mixed quarterly earnings keep investors on edge
By Tricia Wright
LONDON, Feb 5 European stocks inched up on
Wednesday after a steep two-week sell-off, but concerns about
global growth and emerging market currencies kept investors on
The FTSEurofirst 300 index of top European shares
was up 0.2 percent at 1,272.81 points by 1534 GMT, taking a
breather after a 6 percent slide over the past two weeks.
The sell-off - the index's sharpest retreat in seven months
- was spurred by jitters over the impact of reduced stimulus
from the U.S. Federal Reserve on emerging market assets as well
as tepid U.S. and Chinese manufacturing data.
Technical charts showed the FTSEurofirst reaching oversold
levels after the two-week slump, with its relative strength
indexes (RSIs) approaching 30.
"Technically, the market is clearly 'oversold', and
investors should be rushing in. But the problem is the global
economic recovery that everyone was betting on just a few weeks
ago doesn't seem to be as smooth as expected," said Jeanne
Asseraf-Bitton, head of global cross-asset Research at Lyxor
"This year will be a year of transition from a
liquidity-driven market to one driven by fundamentals. But with
question marks now on the outlook for growth, and with a bit
less liquidity, the road could be bumpy."
Investors were reluctant to take new positions before the
European Central Bank's monetary policy decision and news
conference on Thursday, and Friday's monthly U.S. job data.
A shock slump in euro zone inflation to a level way below
the ECB's target is focusing the minds of its policymakers, who
have the chance to respond on Thursday.
"There are a lot of people who are now saying that they
could go into negative (deposit) rates... If they don't do
anything then there'll be disappointment," said Nick Xanders,
head of strategy at BTIG.
A Reuters' poll of economists showed nonfarm payrolls are
expected to have increased by 185,000 last month, bouncing back
from a three-year low in January, which could ease investors'
worries about the pace of economic growth in the world's biggest
Britain's biggest drugmaker GlaxoSmithKline was one
of the biggest supports to the FTSEurofirst 300, up 1.1
percent, after forecasting a better 2014 as productivity in its
drug research labs improves.
The overall earnings picture remained mixed, however, with
Syngenta falling 3.5 percent after the world's largest
maker of crop chemicals reported a drop in profit for last year.
Unibail-Rodamco shed 2.5 percent after Europe's
largest property group's profit outlook disappointed investors.
STOXX Europe 600 firms yet to report are on average seen
missing consensus quarterly earnings forecasts by 1.4 percent
according to Thomson Reuters StarMine SmartEstimates, which
focus on the up-to-date predictions of the historically most
This bodes ill for investors given the widely held opinion
that Europe's equity valuations are unlikely to go much higher
and that earnings need to grow if markets are to continue on
their upward trajectory.
The STOXX Europe 600 trades on a 12-month forward
price/earnings ratio of 13.6 times against its 10-year average
of 11.9 times, Thomson Reuters Datastream shows.
"Earnings growth in Europe has been negative over the last
two years. If earnings do not improve during the next months,
2014 will prove to be a difficult year for the stock market,"
said Koen De Leus, senior economist at KBC, in Brussels.
Europe bourses in 2014:
Asset performance in 2014:
Today's European research round-up