European shares edge up, but set for worst fortnight since June

Business & Markets 2013
Written by Reuters
Friday, 13 December 2013 20:43
A + A - Reset
* FTSEurofirst 300 up 0.2 pct; Euro STOXX 50 up 0.3 pct
* Fed stimulus pullback concerns have hit market this month
* FTSE underperforms as RSA plummets
* Weekly volumes could be thinnest, since January
LONDON (Dec 13): European shares edged higher on Friday, but remained
near two-month lows and were set for their worst fortnight since June, pegged
back by concerns over the U.S. Federal Reserve's stimulus programme.
The FTSEurofirst 300 edged up 0.2 percent at 1,246.92 at 1115 GMT,
steadying after a 0.9 percent drop on Thursday. It has fallen 4.6 percent so far
this month — the biggest two-week drop since June — and was trading at
levels not seen since mid-October.
The pan-European index lagged the euro zone blue chip EuroSTOXX 50, with
British stocks as the regional underperformer.
UK RSA plummeted 17.8 percent to an 8-1/2 year low — its biggest one-day drop since 2002, after it warned tbat earnings would fall in
2013, and it might cut its dividend, leading the CEO to resign.
Nick Xanders, head of equity strategy at BTIG, said there was concern that this was not the end of the negative newsflow from the
company, which issued two profit warnings in November.
The euro zone's blue-chip Euro STOXX 50, which excludes British firms, was up 0.3 percent at 2,929.21, with traders citing technical
buying after recent falls, as supporting the market.
The Euro STOXX 50 index fell in early trade, briefly breaking below its 100-day moving average of 2,926.12, before finding support around
that level. It also flirted with a relative strength indicator reading of 30, which indicates "oversold" conditions.
Phillippe Delabarre, a technical analyst at Trading Central, said that falls in recent weeks — including a break below the 50-day simple
moving average and intermediate support at 3015 points — "jeopardize the medium-term bullish dynamic."
"On the other hand, prices remain supported by the 100-day simple moving average and above our daily stop-loss at 2850 points (May's &
August's highs)."
The declines have come in light volumes, and with another quiet session on Friday; the FTSEurofirst could see its thinnest week of trade
since the first week of January.
A poll of more than 50 strategists found that stock markets will extend their strong rally into 2014, driven by optimism about a more durable
economic recovery and the prospect of a long period of very accommodative monetary policy.
However, traders said that uncertainty over whether the Fed would slow its stimulus programme next week, was discouraging the usual
"Santa" rally in December, with investors instead choosing to lock in good year-to-date gains, for the time being.
Despite being down 4.6 percent this month, the FTSEurofirst remains up 10 percent, so far this year.
"Even if we don't see any slow-up in stimulus from the Fed, we may be too far down on the month, to recover that lost ground," Alastair
McCaig, analyst at IG, said.
"But if they maintain stimulus at this level, that could be the catalyst for gains into year end."