By Jamie McGeever
LONDON, June 24 European stocks fell on Tuesday
after a survey found German business morale was flagging,
raising concern over growth in Europe's largest economy.
Sterling weakened after dovish remarks by the head of the Bank
Germany's Ifo index of business sentiment fell more than
expected in June to its lowest this year, leading shares to give
up gains they had scored on talk of mergers and acquisitions.
The FTSEurofirst 300 index of leading shares dropped 0.2
percent to 1385 points, Germany's DAX was down 0.1
percent at 9912 points and France's CAC 40 was
up 0.1 percent at 4520 points. Britain's FTSE 100 fell
0.25 percent to 6783 points.
"You are seeing economic statistics in Europe that are
disappointing," said Francois Savary, chief investment officer
at Swiss bank Reyl. "There is nothing major, but I think it is
time for a period of some consolidation on the markets."
Economists at Barclays said the Ifo data and Monday's
surprisingly soft manufacturing PMI figures suggest German
growth in the current cycle has peaked.
The losses offset renewed talk on Tuesday of merger and
acquisition activity. Agrochemicals company Syngenta
surged as much as 6.5 percent on a media report that Monsanto
had considered buying it in a deal worth $40 billion.
Syngenta shares were last up 4.5 percent.
"Our outlook for equity markets for the remainder of the
year is positive. M&A has made a welcome return in recent
months," said Mark Burgess, the chief investment officer at
Earlier, the majority of markets in Asia edged higher after
a sluggish start. The MSCI broadest index of Asia-Pacific shares
outside Japan rose 0.3 percent. Japan's Nikkei
added a slender 0.05 percent.
CARNEY KNOCKS STERLING
The biggest mover in currency markets was sterling, which
fell below $1.70 and from its recent five-year highs. The pound
weakened after Bank of England Governor Mark Carney told UK
lawmakers the UK economy was seeing little wage or inflationary
pressure. He also said spare capacity will need to be absorbed
before interest rates rise.
That appeared to cool expectations UK interest rates would
be raised this year - expectations that were fueled by comments
from Carney himself earlier this month.
"An early rate hike may not be a done deal as yet," said
Valentin Marinov, the head of G10 currency strategy at Citi.
Sterling was last down 0.2 percent at $1.6995. It had
earlier fallen more than half a cent, to as low as $1.6971.
The euro was up slightly at $1.3617 and the dollar
down against the yen at 101.85 yen, leaving the dollar
index a little lower at 80.212. That was well within the
narrow 80.000-81.000 range seen since May.
In commodity markets, oil eased down from recent nine-month
highs after data on Monday showed that Iraq's oil exports neared
record levels in June, around 2.53 million barrels a day,
despite the Sunni Islamist insurgency sweeping through the
Brent crude oil futures dipped below $114 a barrel,
on track for the third straight day of decline, something not
seen for a month. U.S. oil futures were down 0.2 percent
at $105.90 a barrel.
"The supply news isn't really supporting oil prices. The
only thing supporting them is the fear factor," said Carsten
Fritsch, an oil analyst at Commerzbank in Frankfurt.
Spot gold rose to its highest in more than two
months, to $1,325 an ounce, for gains so far this month of
around $75. Silver rose to its highest since March, above $21 an
U.S. Treasury bonds rose, pushing the 10-year benchmark
yield down almost three basis points to 2.59 percent
(Reporting by Jamie McGeever, additional reporting by Sudip
Kar-Gupta; Editing by Larry King; To read Reuters Global
Investing Blog click here;
for the MacroScope Blog click on blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on blogs.reuters.com/hedgehub)