LONDON, July 21 (Reuters) - European shares fell on Thursday on global recovery worries after new data showed an unexpected weakening in German private sector growth and a contraction in China's manufacturing industry for the first time in a year, hitting mining stocks.
The market snapped its upward trend after Purchasing Managers Index data showed German manufacturing orders falling for the first time in two years, fuelling investor fears that Europe's largest economy might be losing steam.
Miners, whose growth is dependent on a strong economic outlook featured among the worst performers, after China's factory sector contracted at its fastest pace since March 2009, with the STOXX Europe 600 Basic Resources index down 1.4 percent.
Xstrata , Rio Tinto and Kazakhmys were standout losers, falling 1.6-2.4 percent.
"The German PMI registered a loss of momentum. I do not think it means Europe will go into recession, but growth is slowing," Mike Lenhoff, market strategist at Brewin Dolphin, said.
"We had a poor Chinese PMI figure, rising inflation is squeezing real income growth and it looks like the market is having another wobbly day."
Global economy worries were not the only factor to influence the market, with corporate results proving to be another drag on the index. Ericsson (ERICb.ST), the world's biggest mobile telecommunications network equipment maker, fell 9.6 percent to become the worst performer in the FTSE Eurofirst 300 index after its second-quarter profit came in below expectations.
By 0910 GMT the FTSEurofirst 300 was down 0.5 percent at 1,086.15 points, but support was seen at the 1,066 March low - a number which it had previously bounced from when last tested.
Resistance was seen at 1,132 - a number reached in July after strong U.S. data.
EURO ZONE SUMMIT HOPES
However, the periphery euro zone exchanges were outperforming the rest of Europe on hopes that euro zone leaders will emerge from their emergency summit meeting in Brussels on Thursday with a second bailout deal for Greece.
The details of a preliminary deal reached between France and Germany overnight are expected to be presented at the summit and have not yet been made public.
Spain's IBEX rose 0.7 percent, Portugal's PSI 20 gained 0.5 percent and Greece's Athen's General was up 1 percent, while Germany's DAX fell 0.7 percent.
"France and Germany striking an accord is very good news for the euro zone," Will Hedden, sales trader at IG Index, said. "It will be the peripheral exchanges that will benefit the most.
Banks extended their rebound to feature among the top performers after making their biggest one-day percentage gain since January in the previous session, with the STOXX Europe 600 Banks index gaining 0.8 percent.
The index has lost 23.5 percent since mid-February, when concerns about the euro zone peripheral debt crisis and the global recovery intensified.
There are still concerns the Greek debt crisis could spread to other debt-laden countries like Spain and Italy and analysts said any market gains on Thursday could be short-lived.
"The risk of contagion remains, the Greece problem has not really gone away, just been brushed aside," Hedden said.
By Joanne Frearson
Source: www.reuters.com
The market snapped its upward trend after Purchasing Managers Index data showed German manufacturing orders falling for the first time in two years, fuelling investor fears that Europe's largest economy might be losing steam.
Miners, whose growth is dependent on a strong economic outlook featured among the worst performers, after China's factory sector contracted at its fastest pace since March 2009, with the STOXX Europe 600 Basic Resources index down 1.4 percent.
Xstrata , Rio Tinto and Kazakhmys were standout losers, falling 1.6-2.4 percent.
"The German PMI registered a loss of momentum. I do not think it means Europe will go into recession, but growth is slowing," Mike Lenhoff, market strategist at Brewin Dolphin, said.
"We had a poor Chinese PMI figure, rising inflation is squeezing real income growth and it looks like the market is having another wobbly day."
Global economy worries were not the only factor to influence the market, with corporate results proving to be another drag on the index. Ericsson (ERICb.ST), the world's biggest mobile telecommunications network equipment maker, fell 9.6 percent to become the worst performer in the FTSE Eurofirst 300 index after its second-quarter profit came in below expectations.
By 0910 GMT the FTSEurofirst 300 was down 0.5 percent at 1,086.15 points, but support was seen at the 1,066 March low - a number which it had previously bounced from when last tested.
Resistance was seen at 1,132 - a number reached in July after strong U.S. data.
EURO ZONE SUMMIT HOPES
However, the periphery euro zone exchanges were outperforming the rest of Europe on hopes that euro zone leaders will emerge from their emergency summit meeting in Brussels on Thursday with a second bailout deal for Greece.
The details of a preliminary deal reached between France and Germany overnight are expected to be presented at the summit and have not yet been made public.
Spain's IBEX rose 0.7 percent, Portugal's PSI 20 gained 0.5 percent and Greece's Athen's General was up 1 percent, while Germany's DAX fell 0.7 percent.
"France and Germany striking an accord is very good news for the euro zone," Will Hedden, sales trader at IG Index, said. "It will be the peripheral exchanges that will benefit the most.
Banks extended their rebound to feature among the top performers after making their biggest one-day percentage gain since January in the previous session, with the STOXX Europe 600 Banks index gaining 0.8 percent.
The index has lost 23.5 percent since mid-February, when concerns about the euro zone peripheral debt crisis and the global recovery intensified.
There are still concerns the Greek debt crisis could spread to other debt-laden countries like Spain and Italy and analysts said any market gains on Thursday could be short-lived.
"The risk of contagion remains, the Greece problem has not really gone away, just been brushed aside," Hedden said.
By Joanne Frearson
Source: www.reuters.com
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