December 5, 2017 / 10:34 AM / a year ago

European shares slip in cyclical-defensive tug of war

LONDON (Reuters) - European shares slipped on Tuesday as cyclical stocks fell, while dwindling enthusiasm over a U.S. tax bill weighed on financial service providers.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, December 1, 2017. REUTERS/Staff/Remote

The pan-European STOXX 600 index , fresh from its best day in six weeks, fell 0.2 percent, as weak financials and healthcare shares outweighed a rally in consumer staples and utilities, while tech stocks rebounded, tracking U.S. peers.

Consumer stocks Danone (DANO.PA) and Diageo (DGE.L) both rose 0.7 percent gained, while utilities Enel (ENEI.MI) and E.ON (EONGn.DE) also advanced by around 1 percent.

“It’s been noticeable there has been a distinct sector rotation over the last week which is impacting the momentum of the market,” wrote Deutsche Bank strategist Jim Reid in a note.

Euro zone banks .SX7E slipped after their best gains in two months, falling 0.5 percent. Santander (SAN.MC), BNP Paribas (BNPP.PA) and Deutsche Bank (DBKGn.DE) were among those losing ground after gaining in the previous session.

UBS analysts noted that although lower taxes on future U.S. earnings would help European banks, U.S. banks would benefit more, giving them a competitive advantage.

British sub-prime lender Provident Financial (PFG.L) fell 10.2 percent after UK regulator FCA opened an investigation into its Moneybarn unit.

Chipmakers led tech stocks .SX8P higher after a volatile session that saw the sector hit by profit taking in morning.

Dialog Semiconductor (DLGS.DE) rose 3.5 percent, rebounding after a three-day drop of 40 percent on fears Apple (AAPL.O) would in-source its chip production.

Infineon (IFXGn.DE) and STMicro (STM.MI) both rose more than 1.5 percent, while iPhone supplier Ams (AMS.S) - the best-performing European stock of 2017 - edged up 0.6 percent.

The sector turned higher as technology stocks in the U.S. recovered from a two-day selloff.

Mining companies were the worst-performing as metals prices slipped.

Healthcare stocks were also bruised, led down by Sanofi (SASY.PA). The Philippines stopped sales of its dengue vaccine after the company warned it could worsen the disease in some cases.

The healthcare sector has underperformed the market this year, and Goldman Sachs strategists wrote investors are “still struggling to come to terms with a punishing Q3 reporting season... and broad sentiment remaining depressed.”

Luxury brand Moncler (MONC.MI) was top of Italian stocks, up 2.7 percent after Deutsche Bank upgraded it to “buy” in a note forecasting healthy growth for the luxury sector in 2018.

Additional reporting by Danilo Masoni, Editing by Georgina Prodhan

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