European shares hit four-week low

European equities hit a four-week closing low on Tuesday as disappointing economic numbers hurt sentiment, while a cut in outlook by the world's top technology company, Hewlett-Packard, put pressure on tech shares. Figures showed US housing starts and permits for future home construction fell in April, the ZEW index measuring German analyst and investor sentiment was lower than expected, British inflation hit a 2-1/2-year high and US April industrial output numbers came in flat.
Tech shares were among the top losers, with the European sector index falling 2.4 percent as Hewlett-Packard said the sluggish consumer PC market and the impact of Japan's earthquake were expected to hurt the company's profits for the rest of the year. ARM Holdings fell 4.6 percent.
The FTSEurofirst 300 index of top European shares finished 1 percent weaker at 1,126.94 points, the lowest close since April 19. The index is up just 0.5 percent this year. "The largest part of recovery in earnings since 2009 is behind us and progress, although positive, will be less easy from here," said Don Fitzgerald, fund manager of European equities at Tocqueville Finance, which manages $2.2 billion.
"There are valid concerns regarding sustainability of margins, commodity price pressures, government finances and the start of the interest rate tightening cycle," he added. Chemical shares underperformed, down 2.4 percent, while automobile stocks fell 2 percent on figures showing new passenger car sales fell 4.1 percent in the European Union last month.
"It's probably going to be a long, hard summer, with lower volumes. Hedge funds are shorting the market and there may be a switch back to bonds," said a fund manager in London, whose company manages about $80 billion. "You have also got the Glencore issue coming shortly and people may be raising cash for that as well." Glencore is set to price its record listing at or above 530 pence per share, sources close to the matter said, valuing the commodities trader at a minimum of 36.5 billion pounds ($59 billion).
The Euro STOXX 50, the eurozone's blue chip index, fell 1.1 percent to 2,849.60 points. Dmytro Bondar, technical analyst at RBS, said the index finalised a head and shoulders pattern after breaking below the neckline at 2,900. The measuring target from the pattern stood at 2,760, close to Fibonacci retracements near that level.
"The outside session and dark cloud cover on the weekly candlestick chart have been confirmed and now suggest corrective mood in the near term," Bondar said. A BofA Merrill Lynch survey of fund managers showed that Investors' confidence in the outlook for global growth and company profits had dipped. Fund managers trimmed exposure to equities and commodities and added to cash and bonds slightly.
Risk aversion was more evident in strong sector rotation into more defensive areas, such as consumer staples and pharmaceuticals, and out of more volatile and growth-dependent sectors, such as energy and materials, the survey said. The eurozone debt crisis, especially the situation in Greece, prompted investors to stay cautious. Jean-Claude Juncker, the chairman of the 17-country Eurogroup, acknowledged that Greece might have to restructure its debts.
"Last year's bailout has done nothing to help solve Greece's debt problems. Reform has been slow and investors are unwilling to lend money to Greece at anything other than punitive repayment rates," said Lothar Mentel, chief investment officer at Octopus Investments, which manages $4 billion. Greek shares, however, gained 1.3 percent.