Reuters: European shares fell by midday on Tuesday, led by banks, with investors cautious ahead of Wednesday's U.S. interest rate decision and as Iran denied market talk that its nuclear sites had been attacked.
By Patrizia Kokot
LONDON, June 24 (Reuters) – European shares fell by midday on Tuesday, led by banks, with investors cautious ahead of Wednesday's U.S. interest rate decision and as Iran denied market talk that its nuclear sites had been attacked.
At 1141 GMT, the FTSEurofirst 300 index of top European shares was down 1.35 percent at 1,206.33 points after briefly advancing to 1,229.08 earlier in the session.
Market talk of an Israeli attack on Iranian nuclear facilities dragged stocks deep into the red after a choppy start to trading. A senior Iranian nuclear official denied any attack had taken place.
Automotive stocks were among the sharpest decliners amid concerns over demand as the price of crude remained stubbornly around $138 a barrel and the euro rose to $1.5566.
BMW, Daimler, Fiat and Porsche fell 3 to 6 percent.
"There is still a determined effort on the part of the bears to sell and they are keeping the upper hand and won't really be happy until we reach March lows," Mike Lenhoff, Chief Strategist and Head of Research at Brewin Dolphin Securities said.
"The point is that because of the credit crunch there is limited access to borrowing on the part of the consumer, so we are looking at a significant global economic slowdown and further earnings downgrades," Lenhoff added, noting that "until we see some sort of stability in the outlook for eonomic activity, the pressure will remain."
The strong euro also pulled luxury good makers lower. Hermes shed 3.9 percent, Luxottica lost 4.3 percent and Swatch Group fell 2.3 percent.
Banks also turned lower with Credit Suisse, Deutsche Bank and HSBC all down between 0.6 and 1.4 percent.
But UBS gained 2 percent on market talk that HSBC could make a bid for the bank. Both banks declined to comment.
Across Europe, Britain's FTSE .FTSE was down 1.2 percent, Germany's DAX .GDAXI fell 1.7 percent and France's CAC .FCHI was down 1.3 percent.
Fear of weak updates, the high price of crude and a persistently weak U.S. dollar all fuelling inflation reversed earlier gains.
Warning words from German Economy Minister Michael Glos that the high oil price poses a "monstrous" threat to the global economy did nothing to elevate the mood ahead of Wednesday's interest rate setting decision by the Federal Reserve Open Markets Committee.
German deputy economy minister Walther Otremba told reporters in Berlin that the country's economy may have shrunk in the second quarter and stagnation would be a positive outcome.
Among gainers, Dutch semiconductor equipment maker ASML was the top percentage advancer on the FTSEurofirst 300, rising 3 percent after Goldman Sachs upgraded the stock.
Pharmaceuticals were broadly stronger with Novartis up 1.6 percent on the back of an upgrade from Exane BNP Paribas. And Denmark's Novo Nordisk rose 2.6 percent after Goldman upgraded the stocks, citing a strong and sustainable long-term growth outlook.
In the retail sector, British department stores group Debenhams rose 4 percent after like-for-like sales rose by more than expected in the last 10 weeks.
But truck maker Volvo slumped 6 percent as its May delivery numbers disappointed. Peer MAN AG fell back 4.7 percent.
"Following the strong April number we were expecting to raise our number for Q2 following the May figure. This will probably not be the case as we will leave them unchanged ahead of Q2," Swedish brokerage Carnegie said in a note, adding that the delivery numbers came in "much below" its estimates. (Reporting by Patrizia Kokot; Editing by David Cowell)