* FTSEurofirst 300 down 0.9 pct, Euro STOXX 50 down 0.7 pct
* Euro STOXX 50 testing support at 100-day moving average
* Peugeot shares set to further drop as GM sells stake
By Blaise Robinson
PARIS, Dec 12 European stocks extended a
two-week sell-off on Thursday as investors booked profits, wary
that the U.S. Federal Reserve will start winding down its
stimulus programme soon.
The FTSEurofirst 300 index of top European shares
fell 0.9 percent to 1,244.66 points, a level not seen since
The benchmark index - which was up 15 percent on the year at
the end of November - has dropped 4.5 percent since then, its
biggest decline in six months.
European stocks trimmed their losses in late trade after
data showed more Americans filed claims for unemployment
benefits last week, reversing three weeks of declines.
"The data is quite soft, but I don't think it really changes
the big picture, after the string of pretty strong figures such
as the GDP we just got," Saxo Bank sales trader Andrea Tueni
said. "The deal on the budget has also removed a hurdle for the
Fed, which will probably announce something next week.
"It could be a first cut in quantitative easing, or a time
frame for it. All in all, the market is pricing in some kind of
tapering in December, but there's no panic, just some profit
The provisional budget deal in Washington this week has
triggered speculation the Fed could start trimming its
bond-buying programme as early as next week.
Investor sentiment was also hurt on Thursday by data that
showed euro zone industrial output dropped at its worst monthly
rate in more than a year in October, a sign the region's
recovery remains fragile.
Banking shares were among the biggest losers, with
Commerzbank losing 2.5 percent and UBS down
Around Europe, UK's FTSE 100 index fell 1 percent,
Germany's DAX index down 0.7 percent, and France's CAC
40 down 0.4 percent.
The euro zone's blue-chip Euro STOXX 50 index
fell 0.7 percent at 2,928.12 points, after testing a key support
level at 2,926.19 points, representing the index's 100-day
moving average. Breaking below it would send a technical bearish
For Psigma Investment Management's fund manager Tim Gregory,
however, the current pull-back represents a buying opportunity.
"We think there is a chance that Fed tapering will begin
next week," he said. "However, whether it is December, January
or March is less important than the fact that the Fed feels able
to make a start on withdrawing quantitative easing.
"Equities remain our asset class of choice on a five-year
view so we would prefer to adopt a strategy of buying dips over
A Reuters poll showed on Thursday that fund managers,
traders and analysts see European stocks extending their strong
rally into 2014, driven by optimism about a more durable
economic recovery and the prospect of a long period of very
accommodative monetary policy.
However, shares in struggling carmaker PSA Peugeot Citroen
sank 7.6 percent on Thursday, after it announced a big
writedown and confirmed that it was mulling a capital increase.
The stock was set to further sink on Friday. After the
European closing bell, General Motors Co said it would
sell its entire 7 percent stake in Peugeot through a private
placement to institutional investors.
According to traders, the shares will be offered at between
10 euros and 10.25 euros a share, representing a discount of as
much as 5.9 percent to Thursday's closing price.