European shares end four-week winning run

European shares fell yesterday, ending four weeks of gains, pressured by weak US consumer confidence data, which raised questions about the pace of recovery in the world's largest economy.

Financials were among the top losers on the pan-European FTSEurofirst 300 index, which closed 0.8 per cent lower at 940.94 points after trading as high as 954.60 earlier in the day. It lost one per cent during the week.

Among financials, HSBC, Credit Suisse, Standard Chartered, ING, Credit Agricole and Deutsche Bank lost 0.9-4 per cent.

"This is becoming more of the view that this rally is looking to run out of steam anytime soon and no one wants to be exposed on the upside," said Manoj Ladwa, senior trader at ETX Capital in London.

Volumes on the FTSEurofirst 300 were about 77 per cent of its 90-day daily average volume.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 were down 0.8-1.7 per cent. US stocks were also down sharply.

US consumer confidence fell in early August as a growing number of Americans fretted about their finances even though they expected the broader economy to improve, the Reuters/University of Michigan Surveys of Consumers said.

Stronger second-quarter corporate earnings, partly aided by lower market expectations, have helped the FTSEurofirst 300 to maintain its rally since hitting a lifetime low in March. The index has gained 46 per cent since March, and is up 13 per cent for the year.

"To get further upside, companies need to deliver on the earnings. They have to start seeing positive earnings growth coming in, rather than less (earnings) downgrades," said Nick Nelson, UBS's equity strategist. "You also need to see positive GDP growth in the third quarter as well." Auto makers were another heavy loser on the pan-European index, after Volkswagen plunged 15.6 per cent on fears it was overpaying for a stake in the sports car unit of Porsche, and on its plan for an issue of preference stock.

Porsche shares, however, jumped 8.7 per cent.

Within the sector, Renault, Peugeot, BMW and Daimler shed 1.2-5.2 per cent.

Swatch Group, the world's largest watchmaker, surged nearly 13 per cent after saying it expected demand to pick up in the second half, while reporting first-half net profit that beat forecasts.

The results boosted the luxury goods sector, with Richemont and LVMH up 3.3 and 5.5 per cent, respectively.

Real estate shares were also in demand after a 3.9 per cent gain in British Land on a report that a group of Indian and Gulf investors is mulling a £10-billion-plus (€11.66 billion) takeover of the property firm.

The news lifted the property sector, with Hammerson, Liberty International and Land Securities rising 0.7-1.7 per cent.

Hedge fund manager Crispin Odey said equity markets were likely to fall after their sharp rally so far this year.

"Markets are now a little overbought and will probably have a pullback," said Odey, founding partner at Odey Asset Management, in a note to clients.