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European shares weighed by U.S. budget uncertainty
December 17, 2012 / 12:35 PM / 5 years ago

European shares weighed by U.S. budget uncertainty

* FTSEurofirst 300 down 0.3 pct

* Aggreko plunges 17 pct, cautions on 2013 outlook

* KPN shares slides 14 pct after dividend cut

By Tricia Wright

LONDON, Dec 17 (Reuters) - European shares fell at the start of what could be a choppy week on Monday given uncertainty over whether a budget deal can be struck in Washington,

They were led lower by temporary power provider Aggreko after a negative update.

The FTSEurofirst 300 was down 0.3 percent at 1,130.18 by 1214 GMT. The index dipped 0.1 percent in the previous session, having on Thursday snapped an eight-session winning streak which had seen it hit a fresh 2012 high of 1,141.32.

A key issue continued to be worries over the U.S. budget impasse, and whether the United States would miss a year-end deadline to avert the “fiscal cliff” of some $600 billion of tax hikes and spending cuts due to start in January.

A proposal for tax hikes on incomes over $1 million a year from U.S. Republican House Speaker John Boehner on Sunday was seen as a move towards agreement, but it remains far off President Barack Obama’s position.

While many in the market believe a deal on the U.S. budget will be reached, any news to the contrary could open the way to significant index falls, particularly in light of seasonally thin volumes.

“Stocks are at their highs for the year so the risk is more to the downside than the upside,” Michael Hewson, senior analyst at CMC Markets, said. “For the markets to go higher you need some resolution, or some possibility of a resolution - and there is none.”

Trading volume on the FTSEurofirst 300 stood at a third of its 90-day daily average, with volume on Monday highly concentrated in stocks affected by disappointing newsflow.

Aggreko took the hardest hit in terms of percentage, off 17 percent, after it warned on the outlook for its business in a trading update, prompting Investec Securities to cut its rating on the stock to “hold” from “buy”.

“Today’s news will be seen as a something of a setback... That said, we continue to believe that there are many structural drivers that should continue to drive earnings in the years to come,” Investec said in a note.

Volume in Aggreko was more than four times its daily average.

Telecoms group KPN slid nearly 14 percent, leading falls seen among peers, after the Dutch state raised much more than expected in its auction of fourth generation (4G) wireless frequencies, with prices so high KPN cut its dividend for this year and next to afford its licences.

Trading volume in KPN was also robust at more than four times its 90-day daily average.

Heavyweight Vodafone was another significant faller, off 2.6 percent and knocking most points off the index. Its trading volume stood at 86 percent of its 90-day daily average.

“Continually on slow days where there isn’t a considerable amount of news we tend to get slippage on one, two, three stocks where it does a high degree of damage,” Andy Ash, head of sales at Monument Securities.

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