November 3, 2014 / 4:05 PM / 4 years ago

European shares retreat from highs on disappointing data

* FTSEurofirst 300 index falls 0.72 percent

* Euro zone manufacturing survey hurts sentiment

* Snam leads European utilities index lower

By Atul Prakash

LONDON, Nov 3 (Reuters) - European shares fell from a four-week high on Monday, with disappointing data from Europe and the United States hurting sentiment and gas transport group Snam leading the utilities sector down following a regulatory setback.

The European utilities index fell 2.3 percent, the top sectoral decliner, on a 10 percent drop in Snam after a regulator ruling that cut the remuneration rate for the gas storage business in 2015. Enel and Terna fell 4.4 percent and 6.6 percent respectively.

At 1600 GMT, the FTSEurofirst 300 index of top European shares was down 0.72 percent at 1,342.28 points after rising to as much as 1,355.16, the highest since early October. The index climbed 1.8 percent on Friday after the Bank of Japan surprised global markets by ramping up its stimulus spending.

European shares extended losses in late trading despite the ISM’s data showing U.S. manufacturing expanded far more briskly than estimated, with investors instead focusing on Markit figures showing the manufacturing sector slowed in October and the Commerce Department’s construction spending numbers that fell for a second straight month in September.

U.S. economic numbers added to investors’ jitters after a business survey showed manufacturing activity in the euro zone grew slightly more slowly than thought last month.

“PMI data in the euro zone were once again on the weak side, making investors cautious,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said.

“However, the weaker and more disappointing the figures are, the bigger the probability becomes that the European Central Bank gets more aggressive.”

Figures also showed that Germany, the region’s growth engine, recorded only tepid expansion and France and Italy contracted.

Lorne Baring, managing director of B Capital Wealth Management, said the euro zone data confirmed the ongoing stagnation worry for Europe and highlighted the necessity for the ECB actively to help the region’s economy.

“Equity valuations in Europe are cheap relative to developed markets in general. However, there is no real catalyst for driving European equities. So we would see European equities as range-bound and not offering a great opportunity at the moment.”

Italy’s MIB index underperformed, down 1.9 percent, on weaker utilities and as national statistics office ISTAT forecast the country’s economy will contract by 0.3 percent this year, in line with the government’s most recent forecast, and grow by a weak 0.5 percent in 2015.

Disappointing surveys on China’s manufacturing and services sectors also weighed on sentiment. Analysts advised caution about the market’s near-term outlook.

“While stocks surged on Friday, implied volatility barely moved down, which means that there are still a lot of question marks. Investors are not completely reassured, and visibility is very poor,” said Jean-Louis Cussac, head of Paris-based firm Perceval Finance.

“This is a market for hedge funds: speculation, arbitrage, algo-trading, while the flows from real buy-and-hold investors remain thin.”

Some sectors, however, managed to stay positive. Airline stocks were boosted by an 8.4-percent jump in Ryanair after it lifted its annual profit forecast almost 20 percent on a surge in winter bookings, and said it would slash fares by up to 10 percent in the new year

The upbeat outlook helped its rivals, with easyJet up 2.7 percent and Air France-KLM gaining 3 percent.

Among other sharp movers, Puma jumped 10 percent, with traders citing talk of a bid for French group Kering’s 86-percent stake in the German sportswear company. Kering and Puma both declined to comment.

Half way into the earnings season, 67 percent of companies met or beat profit forecasts and 58 percent met or beat revenue predictions, StarMine data showed. In absolute terms, profits are up 8.9 percent, while revenues are down 0.5 percent, highlighting the fact that Europe’s earnings rebound has mostly been coming from cost-cutting and lower financing costs.

Europe bourses in 2014:

Asset performance in 2014:

Today’s European research round-up (Additional reporting by Blaise Robinson in Paris; Editing by Janet Lawrence and Crispian Balmer)

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