European shares dented by earnings and weak US data

European shares ended a touch lower yesterday, pegged back by downbeat earnings news and US data, although some analysts expect the market to resume its grind higher.

The FTSEurofirst 300 closed down 0.21 point at 1,245.45, with heavyweight Swiss insurer Zurich off 3.3 per cent after a seven per cent drop in first-quarter net profit.

Concerns about the global economy were heightened by weak data on the US labour and housing markets.

Even so, confidence remains high in central banks’ ability to keep pumping money to nurse their economies back to health.

That has helped the FTSEurofirst 300 to rise around 10 per cent in 2013, taking it to levels last seen in June 2008.

“The economic data is weak, the earnings figures aren’t great, so one has to assume that investors are thinking more positively about the future,” Andrew Milligan, head of global strategy at Standard Life Investments, said.

Milligan said that markets are buying into the idea that a deceleration in global activity should begin to turn around “with a consequent improvement in profits in due course”.

Standard Life Investments has £179.1 billion of assets under management.

National Grid weighed on the utilities sector , shedding 1.1 per cent, as traders cited concerns over the sustainability of the company’s dividend policy and earnings after the British energy distributor’s results.

Liberum said consensus earnings expectations for 2014 for National Grid remain at risk, even though it has beaten forecasts in the current year.

The Euro STOXX 50, meanwhile, closed down 2.88 points, or 0.1 per cent, at 2,806.70.

While technical momentum indicators such as the relative strength index show the Euro STOXX 50 is starting to looking stretched, analysts see scope for more gains as investors continue to plump for equities over bonds due to better returns.

“At some point we are going to get a reasonable pull-back but... that would simply be a minor pull-back in an ongoing uptrend,” Bill McNamara, technical analyst at Charles Stanley, said.

McNamara targeted 2,875, a closing peak hit on July 1 2011, in the next two to three weeks. Meanwhile also yesterday according to an estimate published by the US Department of Energy enhanced oil recovery (EOR) techniques could boost US domestic oil production by four million barrels per day for 50 years, while storing all the emissions from 93 large coal-fired power plants, at a price of just $85 per barrel.

By injecting carbon dioxide (CO2) into depleted oil fields, the US could recover an extra 67 billion barrels of oil and simultaneously trap 18 billion tonnes of manmade greenhouse gases safely underground.

EOR is more expensive than conventional oil production. Interest in EOR has followed the price cycle, peaking in the late 1970s and early 1980s along with the two oil shocks, and again as prices climbed between 2004 and 2008. Its potential has recently been overshadowed by the surging output from shale, which has pushed up domestic production at the fastest rate on record. As a result, EOR has slipped down the agenda for both policymakers and the industry. (Reuters)