May 4, 2011 / 5:09 PM / 7 years ago

Miners drag European shares lower

* FTSEurofirst 300 index ends down 1.4 percent

* Miners hurt by concerns over China tightening

* Vestas Winds drops after posts operating loss

By Joanne Frearson

LONDON, May 4 (Reuters)- European shares hit a two-week closing low on Wednesday, hit by weak U.S. economic data, concern over China’s growth outlook and forecast-lagging earnings.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed down 1.4 percent at 1,134.61 points, hovering near its 50-day moving average after dipping just below it earlier in the session.

A break below is seen as a negative signal for equities.

The Euro STOXX 50 volatility index .V2TX, Europe’s main gauge of investors’ discomfort, was up 5.1 percent after jumping to its highest level since late March.

Volume was 123.3 percent of its 90-day average.

Sentiment worsened following comments from a Chinese official that Beijing might further tighten monetary policy to curb inflation by raising banks’ required reserves. [ID:nL3E7G403Y]

“European companies which have exposure to the emerging markets margins could slow, with the possibility of more tightening, but domestically Europe should still do well,” said David Hussey, head of European & EAFE Equities at Manulife Asset Management, which has $180 billion in assets under management.

“In the short-term, I expect defensive stocks to outperform over the summer.”

Mining stocks featured among the worst performers on concerns tightening measures in top consumer China would constrict demand, with the STOXX Europe 600 Basic Resources index .SXPP down 2.9 percent.

Antofagasta (ANTO.L) dropped 9 percent after the Chilean miner said first-quarter copper production missed targets. The miner also traded without the attraction of its interim dividend and a 100 cents special payout. [ID:nLDE7421HK]

The market extended losses in afternoon trade after U.S. ISM data fell below forecasts and U.S. private employers added fewer jobs than expected in April, adding to investors’ concerns about the U.S economic recovery. [ID:nN04209762]


    The bearish economic sentiment took a chunk out of most large indexes, with the FTSE 100 .FTSE index down 1.6 percent, Germany's DAX .GDAXI down 1.7 percent and France's CAC 40 .FCHI down 1.3 percent.

    However, Portugal's PSI 20 .PSI20 bucked the trend and traded higher for most of the session as the market digested news of a 78 billion euro three-year bailout deal with the European Union and the IMF. It closed down a modest 0.2 percent. [ID:nLDE74308A]

    Weak earnings news also weighed. Vestas (VWS.CO) slumped 8 percent after the world’s biggest wind turbine manufacturer by market share posted a bigger than expected first-quarter operating loss. [ID:nLDE6650QH]

    Nearly half of the 110 companies on the STOXX Europe 600 index that have so far reported first-quarter earnings have missed analysts’ forecasts, underperforming their U.S. peers, data from Thomson Reuters StarMine shows.

    The STOXX Europe 600 offers cheaper valuations than U.S. stocks. According to Thomson Reuters Datastream, the European gauge carries a 12-month price-to-earnings multiple of 10.9 versus a 10-year average of 13.5 and the S&P 500’s 13.2. The 10-year average of S&P 500’s forward P/E is 15.4 times.

    “Valuations are not demanding, we favour companies which have the ability to have pricing power and also in the position to cope with commodity costs,” Veronika Pechlaner, a manager on the 100 million euro ($144 million) Ashburton European equity fund said. (Reporting by Joanne Frearson; Editing by Will Waterman)

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