QE quandary leaves European shares lower

November 13, 2013

* Banks, miners fall on QE worries

* Royal Dutch Shell (Xetra: R6C1.DEnews) leads oils lower, trades ex-div

* Carlsberg (Other OTC: CABGYnews) , E. ON, SSE (LSE: SSE.Lnews) higher after results

By David Brett

LONDON, Nov 13 (Reuters) – European shares opened lower onWednesday, tracking overnight losses in the U.S. and Asia, ascentral bank forward guidance on monetary policy remained amajor driver of equity markets.

Wall Street wobbled and Asian and European markets followedsuit after Atlanta Fed President Dennis Lockhart, seen as acentrist in policy terms, said on Tuesday a cut in the FederalReserve’s bond-buying operations remained a possibility at itsDec. 17-18 meeting.

Rising volatility and weak volumes early in Novembersuggest investors are beginning to trade more cautiously,despite a slow grind higher in equity markets, as the noisesurrounding the withdrawal of equity-friendly monetary policycranks up again.

With more Fed officials set to speak later in the sessionand Bank of England Governor Mark Carney tasked with delicatelybalancing forecasts on UK inflation, growth and unemploymentwith the investors’ expectations of continued easy monetarypolicy, markets could be in for a choppy ride on Wednesday.

“Investors are looking for a correction this morning …Overall there will be some volatility thrown in with bias to thedownside,” said Jawaid Afsar, sales trader at SecurEquity.

He said talk of withdrawing economic support in the U.S.sooner than expected, given the recent strong economic data, andconcern about the timing of an eventual UK rate rise, were driving risk-off sentiment in the short-term.

Banks and miners, sectors most acutelyexposed to the easy monetary policy adopted by central banks,led the fallers, each down 0.6 percent.

At 0828 GMT, the pan-European FTSEurofirst 300 index was down 3.29 points, or 0.3 percent, at 1,287.63 after falling 0.6 percent in the previous session.

The European oil and gas index also fell sharplywith heavyweight Royal Dutch Shell a majorfactor in the sector’s weakness after the third biggest firm bymarket capitalisation in Europe went ex-dividend.

While equity markets wobbled at the margin on the words ofcentral bankers, more broadly they remain supported aroundmulti-year highs on expectations that monetary policy willremain in place for the foreseeable future and earnings willsoon pick-up to support recent rise in valuations.

Drinks firm Carlsberg rallied 2.8 percent afterits third-quarter results met market expectations and itmaintained earnings guidance, traders said.

Energy firms SSE and E. ON also edgedhigher after their respective results.

There was technical support too for euro zone stocks withthe region’s blue chip Euro STOXX 50 index recovering opening losses to trade flat at 3,033.59 points.

“The Euro STOXX 50 is in a short-term consolidation withinits long-term resistance zone of 3,050-3,080. Next (Berlin: NXG.BEnews) support levelis 3,000,” Sophia Wurm, technical analyst at Commerzbank (Xetra: CBK100news) , said.

“Nevertheless, from a medium-term view, the currentconsolidation should have a trend-confirming character to theupside.”

  • Currency
  • Budget, Tax & Economy
  • Royal Dutch Shell
  • monetary policy

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