European shares knocked by U.S. weakness, mixed earnings

Reuters - UK Focus

* FTSEurofirst 300 down 1 percent

* Nokia (Stockholm: NOKI-SEK.ST - news) slides after sales miss

* U.S., China misses take sheen off of strong euro zone data

* Periphery outperforms, led by Portugal, Sabadell

By Alistair Smout

LONDON, Jan 23 (Reuters) - European shares fell on Thursday,deteriorating in afternoon trade after weak U.S. and Chinesedata raised worries over the global growth outlook, led down bya double digit fall in Nokia as earnings pessimism resurfaced.

Nokia dropped 10.7 percent after it reported asteep fall in sales at its network equipment division, whichwill be its core business once its sale of its phone businessgoes through.

It was joined at the bottom of the pan-European FTSEurofirst by British publisher Pearson (NYSE: PSO - news) , which dropped7.9 percent after warning in a trading update its 2013 earningsper share would be lower than expected.

While European earnings were generally mixed, with Spanishbank Banco de Sabadell SA among those that deliveredabove expectation results, poor earnings from U.S. firms likeMacDonalds and disappointing data combined to hit U.S.shares, dragging Europe lower in the afternoon.

U.S. manufacturing growth slowed in January for the firsttime in three months, hobbled by slower new orders, with initialjobless claims also rising.

The data compounded weaker than expected Chinesemanufacturing data, which depressed the mining sector 0.5 percent.

"With initial jobless claims rising slightly from theprevious week and Chinese flash manufacturing PMI contractingfor the first time in six months investors will approach equitymarkets with increasing valuation concerns," Kash Kamal,research analyst at Sucden Financial, said.

The data set the tone for a weak start on Wall Street,helping to erase any optimism from more encouraging data out ofthe euro zone.

Germany's private sector grew at its fastest pace in morethan 2-1/2 years in January as factory orders flooded in, andwhile French business activity shrank again, it did so at aslower rate than expected.

The FTSEurofirst was down 1 percent at 1,333.91 by1530 GMT. Some analysts said that more strong domestic datawould support future gains.

"I think what is still very supportive is domestic macromomentum. This morning (we had) very strong PMIs in Europe,(and) as long as the macro is pointing up, I think the market'sconcerns about significant earnings downgrades to come will beeasing," JPMorgan analyst Emmanuel Cau said.

Despite the weak performance of European stocks in general,the European periphery outperformed, led up by Portuguese bluechips, up 0.5 percent. The index retraced some of lastsession's sharp losses after Portugal said it met the target forits 2013 budget deficit.

Among the region's outperformers was Spain's Banco deSabadell, up 5.9 percent and the FTSEurofirst's top gainer afterit tripled profits to beat expectations.

Today's European research round-up

Asset returns in 2013:

View Comments (0)