* FTSEurofirst 300 falls 1.2 pct; Euro STOXX 50 down 1.6 pct
* Charts show sentiment bearish following recent sell-off
* Growth-linked sectors like banks among top decliners
By Atul Prakash
LONDON, June 25 European shares hit a one-week
low on Monday as global growth concerns and muted expectations
that this week's European Union summit will yield significant
measures to tackle the euro zone crisis hurt sentiment, with
charts pointing to further losses.
Equity sectors linked to growth suffered heavily, with
banking, automobile, construction and
technology shares falling 1.1 to 1.4 percent.
At 1024 GMT, the FTSEurofirst 300 index of top
European shares was down 1.2 percent at 990.10 points after
dropping to a low of 989.61. It fell 1.2 percent in the past two
sessions on worries about faltering economic growth and the
persisting debt crisis.
The market focus was on the June 28-29 summit, when European
leaders are expected to discuss specific steps towards a
cross-border banking union, closer fiscal integration and the
possibility of a debt redemption fund, according to a document
prepared for the meeting.
"EU leaders have waited for so long to implement any changes
that the situation is almost out of control and affecting
nations across the world," Ion-Marc Valahu, fund manager at
CLAIRINVEST in Geneva, said.
He said a lot of investors had been cautious in trading in
the volatile stock market and the market was mainly driven by
short-term players and hedge funds ahead of the summit.
As well as progress towards a banking union, the summit is
expected to discuss the need for a more integrated budget
policy, steps required for deeper economic integration, and how
to retain "democratic legitimacy" if countries give up some
However, Don Fitzgerald, fund manager at Tocqueville
Finance, which manages $2.2 billion, remained sceptical.
"Macroeconomic data has been weakening for the past few
months and Spain is still having difficulty financing its
deficits at economical levels. I would not expect a miracle from
the EU summit. Any moves will be very evolutionary in nature at
Charts showed that recent declines in share prices had
deteriorated the technical picture for the euro zone's blue chip
Euro STOXX 50 index, which fell 1.6 percent to
2,152.15 points on Monday.
Dmytro Bondar, technical analyst at RBS, said the index saw
a break of the support line of the June channel, a bearish
signal, and failed to close above the 50-day moving average. Its
slow stochastic oscillator entered an overbought region and
displayed convergence between the slow and fast lines.
"The net conclusion is quite negative for the index over a
month horizon, especially once the price closes below 2,148,
which would remove support from this area, provided by a
filled-not-closed gap from June 14," he said, adding the 2,065,
2,000 and 1,940 levels were the main targets for the next month.
Analysts said investors were also nervous ahead of the
second quarter earnings season.
Sluggish growth in Europe and a slowdown in the pace of
economic recovery in the United States have hurt margins and
profitability, with analysts suggesting that investors should
buy when the market corrects and look for companies that have
done well in difficult times and continued to pay a dividend.
"Any upside in share prices will be limited. However, on
sensible corrections, investors should be looking to buy the
dips and increase cyclically exposed stocks, but not in an
aggressive (way) ... just yet," Mike Jarman, chief market
strategist at H2O Markets, said.
Fitzgerald also said that given current valuations, it was
probably too late to raise cash or pile into defensives. "I feel
that there may be better entry points over the summer," he said.
Thomson Reuters Datastream showed that defensive sectors had
become relatively expensive, with healthcare trading at
11.9 times its one-year forward earnings and the food and
beverages sector at 14.4 times.
In contrast, banks were at 6 times and the wider
STOXX Europe 600 index traded at 9.5 times its 12-month
Among individual movers, Shire fell 12.2 percent
after U.S. regulators ruled against the company in a battle over
generic copies of its hyperactivity drug Adderall XR, approving
a cut-price version of the medicine from Watson Pharmaceuticals'
Nokia fall nearly 7 percent after an analyst said
its software partner Microsoft may turn into a rival by
selling its own smartphones, and following strong results from
rival Samsung Electronics.