Tuesday, August 27 12:20:38
European stocks dropped today as unease about the threat of a U.S.-led military strike against Syria prompted some investors to cash in on recent strong gains.
Banking stocks, which had strongly outperformed the market lately, led the broad-based retreat with Deutsche Bank down 2.6 percent and UBS down 1.9 percent.
The FTSEurofirst 300 index of top European shares was down 1.2 percent at 1,209.08 points after falling to as low as 1,206.82, a level not seen since late July.
The United States signalled on Monday possible military action against Syria over a chemical weapons attack in its civil war last week. Washington said it believed Syrian President Bashar al-Assad was responsible for the gassing of hundreds of people in a rebel-held suburb of Damascus.
The rising tensions hit stocks worldwide, with Dubai's index down 7 percent, its largest one-day slump since 2009.
"The full scope of this crisis is difficult to predict at this point, so it becomes an excuse for investors to cash in some of the recent gains," said David Thebault, head of quantitative sales trading, at Global Equities.
"Stocks are fairly valued now, and analyst forecasts are still being cut, so the upside looks limited at least until we get real improvement in corporate profits."
The market rally since late June has propelled European shares to valuation ratios not seen since early 2010.
The broad STOXX Europe 600 trades at 12.9 times expected earnings, above a 10-year average price-to-earnings ratio of 12.1, according to Thomson Reuters Datastream. (Reuters)