European shares lower

European share prices mostly ended lower on Thursday and analysts said the market could be prone to further declines as a sell-off in commodities on demand concerns prompted investors to shun mining and energy shares. A rise in the Euro STOXX 50 volatility index, one of Europe's main barometers of market sentiment, suggested a fall in investors' appetite for risk, while charts indicated a key stockmarket index might come under more pressure.
The FTSEurofirst 300 index of top European shares closed 0.7 percent lower at 1,145.07 points after falling to a low of 1,137.26. The index, which advanced in the previous two sessions, is 2.1 percent higher this year. Miners bore the brunt of the sell-off, with the STOXX Europe 600 Basic Materials index down 2 percent, as copper hit a five-month low on concerns of slower economic growth and demand from China and the United States.
China lifted bank reserve requirements to contain inflation despite signs of the economy slowing down, while the US economy struggled to gain momentum early in the second quarter, with retail sales posting their smallest rise in nine months in April. "Equities and commodities are coming down in a correlated way and the markets will remain nervous and volatile for some time to come," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
Energy shares were also hit hard, with the sector index falling 1.7 percent following a sharp drop in oil prices. BG Group declined 1.9 percent. Growing concerns over the pace of economic recovery on the back of soft data from the US and China have prompted investors to reduce their exposure to market risk, with worries also over the outlook for inflation and monetary tightening.
"The commodity rout of the past two weeks has become a growth scare, hence the sell-off in stocks," said Frederic Buzare, global head of equity management at Dexia AM, which manages a total of 86.3 billion euros ($122 billion). "In doubt, the market will price in earnings forecast downgrades, overshadowing the positive impact of lower input costs for companies," he told Reuters.
Concerns about the eurozone debt crisis remained in the background and analysts said the issue could resurface again. The International Monetary Fund warned the debt crisis could still spread to core euro zone countries and the emerging economies of eastern Europe.
The Euro STOXX 50, the eurozone's blue chip index, fell 0.9 percent to 2,917.05 points. A dark cloud cover formed on its weekly candlestick chart last week suggested a high risk of a further correction in the next few weeks. However, the index remained supported by a long-term trend line being in effect since June 2010, Bondar said, adding the index could find support at around 2,900, which is also closer to the 50-percent Fibonacci retracement from the February-March slide. Telecom shares fell 0.9 percent in high volumes. However, softer crude prices helped airlines in anticipation that fuel costs will fall. Air France-KLM rose 0.9 percent, while Lufthansa gained 2.4 percent.