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European stocks fall to 3-wk low on economic jitters

Published 06/17/2009, 07:35 AM
Updated 06/17/2009, 07:48 AM

* FTSEurofirst 300 down 1.3 percent; hits three-week low

* Resource-related stocks sag, trimming recent strong gains

* Defensives such as telecoms, pharmas eke out gains

* For up-to-the-minute market news, click on

By Blaise Robinson

PARIS, June 17 (Reuters) - European equities sank on Wednesday, falling for the fourth straight session and hitting their lowest level in three weeks, hammered by mounting doubts over a quick economic recovery.

Mining stocks paced the retreat, falling along with metal prices. Rio Tinto shed 5 percent, Anglo American dropped 5.2 percent and Xstrata lost 6.1 percent.

The sector, which has shot up 63 percent since reaching a low in early March, is still up 39 percent year-to-date.

At 1115 GMT, the FTSEurofirst 300 index of top European shares was down 1.3 percent at 851.40 points. The index, which has soared 32 percent since reaching a record low in early March, is up 2.3 percent year-to-date.

"After one of the biggest rallies in history, the air was getting thin on the upside. The market is becoming more vulnerable to bad news again," said Lars Kreckel, equity strategist at Exane BNP Paribas, in London.

"But I don't think this is a total reversal. It's typical to see a maturing rally moving sideways at some point."

European stocks were tracking losses on most Asian bourses and on Wall Street, where mixed economic data fuelled worries over a speedy economic turnaround.

Oil majors were on the downside as oil fell below $70 a barrel. BP shed 2.3 percent, Total dropped 1.9 percent and Repsol shed 2.8 percent.

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Banks also lost ground, with Barclays down 2.3 percent, BBVA down 1.8 percent and UniCredit down 2.3 percent.

Sectors seen as defensive eked out gains, with Vodafone up 2 percent, Sanofi Aventis up 1.9 percent, Deutsche Telekom up 1.6 percent and Carrefour up 1.5 percent.

"In a maturing rally, you often see a period where defensives outperform the market, like we have seen in 2003," Kreckel said. "Betting on the star performers of the first three months of the rally is not necessarily the best way forward. Investors should rather focus on the laggards among cyclicals and bet on some individual defensives."

Around Europe, the UK's FTSE 100 index was down 0.7 percent, Germany's DAX index down 0.8 percent and France's CAC 40 down 0.7 percent.

Spanish power firm Iberdrola tumbled 5.4 percent after the company surprised investors late on Tuesday with plans to issue and sell at least 1.25 billion euros of shares to institutions. Adecco shed 3.9 percent after the group's finance chief was quoted as saying global staffing market conditions were likely to remain tough in 2009 and 2010.

Among the few stocks on the upside, Italian jeweller Bulgari rose 0.7 percent after Exane BNP Paribas upgraded the stock to "outperform" and lifted its target price to 4.7 euros from 2.7 euros. (Editing by Jon Loades-Carter)

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