LONDON: European shares fell on Wednesday as weak U.S data moved the euro higher and impacted the region's stock markets, whose export-led companies have benefited up till now from a drop in the euro currency.
Record low interest rates set by the European Central Bank (ECB) have kept a lid on the euro and buoyed European stocks, but signs of a slight rebound in the euro on foreign exchange markets have led to volatile share price movements.
The U.S. dollar hit its lowest level in around three months on Wednesday after weaker-than-expected U.S. retail sales data for April supported expectations that the Federal Reserve would wait until later to hike rates.
This in turn propped up the euro against the dollar, while a rise in the German bund yield also weighed on European equities.
The pan-European FTSEurofirst 300 index ended down 0.3 percent at 1,570.13 points, while the euro zone's blue-chip Euro STOXX 50 index fell 0.6 percent, surrendering gains made earlier in the day.
Germany's DAX, which reached record highs last month as the weakness in the euro had boosted exporters such as carmaker BMW, fell 1.1 percent to 11,351.46 points.
The FTSEurofirst 300 remains up by around 15 percent since the start of 2015 while the DAX is up 16 percent.
Logic Investments' Harry Shann said he was "short" on the DAX, namely betting on a further fall down to 11,000 points.
"The volatility in the DAX has not been helped by the euro strengthening and a Bund yield that keeps rising. If it falls down to 11,000, then we might buy around there," he said.
FRENCH ECONOMIC GROWTH
Greece's main ATG equity index closed flat but is up only 1 percent this year as Athens has been locked in talks with lenders on a cash-for-reforms agreement.
No agreement has yet been reached and Greece needs a deal to unlock aid within weeks to avoid running out of cash.
France's CAC stock market slightly outperformed to fall less than other European markets. It ended down 0.3 percent.
French telecoms services company Numericable surged 9.6 percent, the best performer on the FTSEurofirst, as Goldman Sachs and Societe Generale raised their price target on Numericable's shares and kept "buy" ratings on the stock.
The Paris market was also propped up by strong French economic data.
France posted its fastest economic growth rate in two years in the first three months of 2015, although Germany slowed from its robust pace late last year, data showed.
SocGen strategists backed going "long" on the CAC to bet on further gains while going "short" on the DAX.
"It did not feel like a full-scale panic earlier this week, more like a short-term correction. I've been buying into the dip on the Euro STOXX," added Andreas Clenow, hedge fund trader and principal at ACIES Asset Management.
Today's European research round-up
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