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European shares end down, snap 3-day winning run

Published 06/12/2009, 12:31 PM
Updated 06/12/2009, 12:33 PM

* FTSEurofirst 300 down 0.2 percent

* Weak commodity prices hurt miners and oils

* Drugmakers rise after pandemic upgrade

By Dominic Lau

LONDON, June 12 (Reuters) - European shares fell on Friday, snapping a three-day winning streak, as softer commodity prices weighed on energy and mining stocks, though demand for pharmaceuticals offered support. The FTSEurofirst 300 index of top European companies closed down 0.2 percent at 885.75 points, after hitting its highest closing level in five months on Thursday. It has gained 1.5 percent this week. Volumes on the pan-European index were about 75 percent of its 90-day average daily volume.

Oil producers were among the leading losers as crude prices slipped. BP, Royal Dutch Shell, Total and Repsol lost between 0.9 and 2.1 percent.

Weaker metals prices hurt miners, with BHP Billiton, Antofagasta, Vedanta Resources, Rio Tinto, Kazakhmys and Fresnillo down 1.3 percent to 8.5 percent.

Banks were mixed. Barclays, Credit Suisse, Deutsche Bank and Lloyds Banking Group dropped between 0.7 and 4.1 percent.

Societe Generale and BNP Paribas rose.

Stephen Pope, chief global market strategist at Cantor Fitzgerald, said the market could move higher as he expected fund mangers who have mostly been sitting on their hands would put their cash to use in coming months.

"Now that we have gone through the 200-day moving average (on the chart) and we are holding on, and we are only few weeks away from the end of the half year, there will be a lot of fund managers thinking, 'My goodness, we are still in cash, and we are not earning anything'," Pope said.

"I do believe there is going to be this push of money that comes in to start the beginning of the third quarter."

Across Europe, Britain's FTSE 100 slipped 0.5 percent, Germany's DAX lost 0.7 percent and France's CAC-40 eased 0.3 percent.

Data showed that euro zone industrial production shrank by more than a fifth in April compared with a year earlier -- a new record -- raising risks that second quarter GDP will be weaker than expected.

In the U.S., consumer confidence rose to a nine-month high in June but failed again to surpass its level in September 2008, when the spectacular failure of Lehman Brothers sent the world economy into a tailspin, the Reuters/University of Michigan Surveys of Consumers said.


"We believe that the 35 percent rise in European equities since March 9 was a move to price out the 'fat tail' probability of a 1930s/1990s Japan scenario," UBS said in a note. "To move higher from here, we think equity markets need to see a recovery in earnings in 2010."

The broker forecast 15 percent growth in European corporate earnings in 2010 after declining 25 percent this year.

Drugmakers were in demand on Friday, lifted by news that the World Health Organization declared an influenza pandemic.

Novartis, Sanofi-Aventis, GlaxoSmithKline and AstraZeneca were up 3 percent to 5.4 percent.

Telecoms, another defensive sector, were also firmer. Deutsche Telecom added 1.2 percent, Cable & Wireless advanced 1.3 percent, and Telefonica tacked on 0.5 percent.

BT Group surged 4.1 percent after Banc of America-Merrill Lynch upgraded its stance for the telecoms carrier to "buy" from "neutral" and raised its price target.

Hedge fund firm Man Group soared 6.4 percent, lifted by BlackRock's deal to buy Barclays Global Investors from Barclays in a $13.5 billion deal.

Traders said there was talk that Man Group could reduce its 18 percent holding in U.S. brokerage MF Global. The hedge fund group declined to comment. (Additional reporting by Peter Starck and Laurence Fletcher, editing by Will Waterman)

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