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European shares weaken on Fed stimulus uncertainty
August 21, 2013 / 11:12 AM / 4 years ago

European shares weaken on Fed stimulus uncertainty

* FTSEurofirst 300 down 0.4 percent

* Heineken falls on mixed results, muted outlook

* FOMC meeting minutes awaited, due at 1800 GMT

* Analysts see Euro STOXX 50 support around 2,775

By Tricia Wright

LONDON, Aug 21 (Reuters) - European shares fell on Wednesday in thin, jittery trade as investors awaited clues on the U.S. monetary policy outlook, though analysts expect technical support levels to cushion a key index from more near-term falls.

UK-listed stocks trading ex-dividend, including heavyweights HSBC and British American Tobacco, took some of the biggest chunks out of the FTSEurofirst 300.

Heineken was another significant faller, off 2.5 percent, after the Dutch brewer reported operating profit above expectations, but earnings per share below and gave a muted outlook for the months ahead.

According to Thomson Reuters StarMine, 89 percent of STOXX Europe 600 companies have announced second-quarter results so far, of which 45 percent have missed forecasts.

By 1033 GMT, the FTSEurofirst 300 was 0.4 percent lower at 1,210.01 points, with the euro zone’s blue-chip Euro STOXX 50 also off 0.4 percent, at 2,777.51 points.

Both indexes are set for their biggest weekly drops in two months, down 1.7 percent and 2.7 percent respectively so far this week, on expectations that the U.S. Federal Reserve will start scaling back its economic stimulus as soon as next month.

These declines should however be seen in the context of seasonally thin trading volumes, which can exaggerate market moves. By mid-session on Wednesday, the FTSEurofirst 300 had traded just a third of its already light 90-day daily average.

Alpari market strategist Craig Erlam said that the blue-chip index will likely trade in the red for the remainder of the day, but support should kick in around 2,775, 2,766 and 2,750.

“While I still believe the U.S. economic data doesn’t justify (stimulus) tapering at this early stage, and therefore think it will be December at the earliest, the majority in the markets clearly think it’s coming in September.”

After Europe’s market close, traders will look at the minutes of the Fed’s July policy meeting, due at 1800 GMT, for any indication as to when and by how much the central bank will cut its stimulus programme.

Bond buying schemes by the Fed and other major central banks have driven investors out of lower-yielding assets and into shares in the past year, helping the FTSEurofirst 300 rise roughly 28 percent since June 2012.

“I do see (stimulus withdrawal) as a very gradual process which equities can digest but we are cautiously positioned and expect volatility,” Richard Champion, chief investment officer at Sanlam Private Investments (UK) Ltd, said.

SPI (UK) currently holds business software maker SAP , food company Nestle, beer maker AB InBev and crop chemicals maker Syngenta - all four of which have strong balance sheets.

In the event of any material equity market dips, Champion said that he would buy into the market.

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