European shares fell sharply yesterday on mixed US data and as traders booked profits while a key index reversed its monthly rising trend for the first time since June.
The pan-European FTSEurofirst 300 index of top shares closed down 2.1 per cent at 976.46 points after hitting 1,002.60 points earlier.
The index, up more than 51 per cent from its lifetime low in early March, closed out this month down 2.1 per cent after gaining in the previous three months.
"I think today a lot of people are settling up positions for the end of the month. A lot of people are using yesterday's gains as an opportunity to close out profits at a higher level," said Joshua Raymond, market strategist at City Index. "Potentially next week it is going to be a crucial for the market and could help determine how the market finishes for the rest of the year. We have got the MPC rate decision, the ECB, the FOMC and non-farm payrolls on yesterday. A lot of people are settling up positions and focusing towards next week," he said.
Across Europe, the FTSE 100 index was down 1.8 per cent, Germany's DAX was 3.1 per cent lower and France's CAC 40 was down 2.9 per cent.
The market was knocked after US consumer sentiment slipped this month, though business activity in the US Midwest expanded this month to the highest level since September 2008.
Banks retreated from earlier gains and took the most points off the index. Banco Santander, BNP Paribas and Deutsche Bank were down 3.1 to 4.3 per cent. However, Lloyds Banking Group gained 1.2 per cent, benefiting from plans to raise capital as an alternative to a government-backed scheme to insure bad debts, prompting Credit Suisse and Exane BNP Paribas to up their ratings.
Energy stocks featured among the worst performers as crude fell back 3.1 per cent. BG Group, BP, Royal Dutch Shell and Total were down 2.4 to 3.4 per cent.
Miners were under pressure as metal prices slipped. Copper was down 2.6 per cent, aluminium fell two per cent and nickel lost 2.4 per cent. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were 3.3 to 6.8 per cent lower.
Alcatel-Lucent slumped 10.6 per cent after it posted a 12th straight quarterly loss in the third quarter and expects at least three more, even with a modest recovery in the telecoms gear market next year. "It will be more difficult for markets to rally further now," said Bernard McAlinden, investment strategist at NCB Stockbrokers.
"You're not going to get the same positive surprises in economic news. The US GDP was good news on the day (Thursday), but the markets will remain worried about (monetary) stimulus withdrawal."
Drugmakers were in demand. Shire gained 4.7 per cent after it said third-quarter revenue beat expectations as strong growth from its new drugs helped offset continued declines from the loss of patent protection on hyperactivity pill Adderall XR.
Its peers Novartis and Elan Corporation were up 0.7 and 4.9 per cent, respectively.