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European stocks dip on US recovery fears

Friday, July 30 12:47:00

European stocks fell today as mixed corporate results prompted investors to cash in some of the strong gains made in the month, ahead of U.S. GDP data that should shed more light on the pace of the recovery.

The second-quarter GDP figure will be closely watched following a flurry of economic data in the past month that pointed to a slowdown in the U.S. economic recovery.

The FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,043.90 points, on track to record a gain of 5 percent on the month --the index's first monthly gain since March.

The Euro STOXX 50, the euro zone's blue-chip index, was down 0.6 percent at 2,735.70 points. The index, which had failed to break major resistance levels for the past three sessions, broke a key support level on Friday, the 50 percent Fibonacci retracement of the fall from an April high to a May low, a downbeat signal.

"The index is bouncing back in a tight range. Earnings have been strong so far, but they weren't strong enough to propel the market out of the range. If that can't do it, I don't know what could," said David Thebault, head of quantitative sales trading, at Global Equities, in Paris.

"Stress test results might be behind us, but the Greek debt crisis has left scars, particularly on foreign investors. They strongly play the correlation between the euro and European equities, so if the euro falls, stocks move along."

The Euro STOXX 50 index and the euro currently have a daily correlation of +0.87 on a rolling 25-day average. Construction and materials shares were among the biggest losers, led by Lafarge, down 4.9 percent after the world's largest cement maker cut its 2010 outlook estimate for global demand in its markets.

Rivals HeidelbergCement and Holcim dropped 4.5 percent and 2.3 percent respectively.

Banks, which had gained strongly earlier this week, retreated on Friday, with BBVA down 1.2 percent and Banco Popolare down 0.4 percent. On the upside, telecom gear maker Alcatel Lucent jumped 9 percent, reversing some of the losses suffered this year, after saying it will reach its annual profit targets as it posted second-quarter results that reassured investors.

Airbus parent EADS gained 2.9 percent after boosting its revenue outlook and setting out plans to increase jetliner production. Investors' appetite for stocks was also dampened by comments made on Thursday by St. Louis Federal Reserve Bank President James Bullard. Bullard said he was worried about the risks the United States might fall into a Japan-style quagmire of falling prices and investment, helping push major U.S. share indexes marginally lower. (C ) Reuters