European shares dip on Greek uncertainty

European shares ended lower on Monday as worries grew about a messy Greek debt default, with political leaders in Greece yet to decide on the terms of a second bailout. The FTSEurofirst 300 index of top European shares closed down 0.1 percent at 1,075.19 points, above its 61.8 percent Fibonacci retracement at 1,062.24 from its February 2011 high to its September 2011 low.
The biggest faller was Glencore, down 4.5 percent after a 17 percent gain over the past three days. Brokers said the commodities trader could pay a hefty premium in its proposed merger with Xstrata, down 1.7 percent. The FTSEurofirst 300 managed to close above a resistance level for the second consecutive session after a rally last week driven by strong US data.
"We are seeing short-term clients selling following the run higher. We need certainty on Greece for the rally to be sustained," said Angus Campbell, head of sales at Capital Spreads. "But unless Greece has a messy default the momentum from last week is not going to be reversed in one day. We could see it push up a few more percent if there is a positive outcome on Greece, but there are still lots of threats to the market."
Banks, many of which have exposure to eurzone peripheral debt featured among the worst performers, with the STOXX Europe 600 Banks index down 0.5 percent after gaining 2.5 percent on Friday following strong US jobs data. The banks index was also in overbought territory, with its 14-day relative strength index at 70.2 - a reading of 70 or above is considered overbought. The standout loser in the banking sector was Julius Baer, which fell 3.8 percent in strong volume after the Swiss bank cut its profit margin target and raised its cost income ratio forecast.
The Euro STOXX 50 volatility index, a key gauge of European investor 'fear' indicated appetite for risk was low. It jumped 6.4 percent to its highest level in just under a week. The higher the volatility index, the lower investor appetite for risk. European regional equity mutual funds also showed investment appetite was weak and remained at levels reflecting the most depressed investor sentiment since July 2008, with the week's net selling amounting to $0.8 billion.