European shares pulled back from five-year highs this morning, led lower by struggling lender Commerzbank and some technical selling on overbought indexes.
Shares in Germany’s No.2 bank fell 4.5 per cent as sources said it may offer shares at a step discount in a rights issue this week, signalling limited appetite for the stock and weighing on the European banking sector.
It was the top faller on Germany’s Dax index, down 0.5 per cent at 8,240.73 points and the pan-European FTSEurofirst 300, down 0.2 per cent at 1,230.97 points at 08.00 GMT.
Both indexes were deep in “overbought” territory, their Relative Strength Indexes - a momentum indicator - showed, leading some short-term technical traders to book profits.
"If (the Dax) falls below 8,200 I reckon we can see a further selloff," ETX Capital strategist Ishaq Siddiqi said.
Standard Chartered, down 4.3 per cent in volume of 72 per cent of its 90-day average, was another major faller.
Traders cited a Bloomberg report that Carson Block, who runs short-seller research firm Muddy Waters, is betting against the UK financial firm's debt because of deteriorating loan quality. The STOXX 600 Europe banking index fell 1.3 per cent.
Some solid corporate results helped European indexes limit their losses, with Italian motorway operator Atlantia up 1.6 percent after a quarterly update.
French carmaker Renault added 2.3 percent after saying its partner Nissan contributed €433 million to first-quarter earnings.
The STOXX Europe 600 index, down 0.2 per cent at 304.3 points, has risen 7.5 per cent since mid-April, fuelled by stimulus measures by central banks, leading some investors to wonder whether a pause may be due.
Strategists at Deutsche Bank said the longer-term trend remained positive, citing stronger data from the United States and early signs of a turnaround in Europe.
“The upside to our year-end Stoxx 600 target of 315 has fallen to 3 per cent, but we remain both strategically and tactically positive on euro area equities,” they write in a note.
Reuters
