Monday, October 07 16:48:52
European stocks drifted lower in thin trading volumes today as the U.S. budget impasse dragged on, putting one benchmark index on course for its lowest close in four weeks.
Luxury goods makers came under pressure after Burberry's chief executive was quoted in French daily Les Echos as saying that the slowdown in luxury goods sales in China may constitute a new market trend.
Burberry dropped 1.3 percent, while France's LVMH was down 1.2 percent, and Swiss watch maker Richemont lost 0.7 percent.
The FTSEurofirst 300 was down 0.2 percent at 1,241.33 points by 1457 GMT, set for its lowest close since Sept. 9.
Trading volume stood at just 60 percent of the 90-day daily average, with many investors sidelined as they awaited further clarification on the U.S. budget situation.
U.S. Democrats and Republicans came no closer on Sunday to a budget agreement that would end a government shutdown, let alone reaching a deal on the U.S. borrowing limit by Oct. 17 to avoid an unprecedented default.
While the market is proving relatively resilient in the face of the U.S. concerns, as seen in Monday's shallow falls, some analysts say it could start to sell off more significantly as the deadline draws nearer.
"Gradually as this continues people might get a little bit more nervous ... we could correct 5 percent from these levels, which could happen fairly quickly," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
Gijsels said he would regard such a dip as a buying opportunity and would back mining stocks - which have underperformed the market this year - on the basis that the global economy is picking up, which should feed through into metals demand.
Miners trade on a 12-month forward price/earnings ratio of 12.1 times, compared with the wider STOXX Europe 600 on 12.9 times.
Despite a two-week slide, the FTSEurofirst 300 index is only 2.6 percent off a five-year high hit in September, supported by steady investment inflows as a pick-up in the region's economy encourages investors to switch out of government bonds and into European stocks.
According to fund-tracking firm EPFR Global, European equity funds have emerged as an "unlikely haven" for investors in the third quarter, enjoying record investment inflows. (Reuters)