LONDON, Aug 11 (Reuters) - European shares fell on Wednesday, with banks and miners declining, after the Federal Reserve's pessimistic view of the U.S. economy stung investors confidence on the sustainability of the economic recovery.
By 1045 GMT, the pan-European FTSEurofirst 300 .FTEU3
index of top shares fell 1.4 percent to 1,047.64 points, falling
for the second day in a row.
The U.S. central bank on Tuesday offered a more sombre
assessment of growth and said it would reinvest the money from
maturing mortgage bonds it holds into government debt to counter
recent signs of economic weakness. [ID:nN09275781]
"The comments from the Fed yesterday are weighing on the
market. There is a bit of nervousness about the outlook for the
U.S. economy and we see some economy sensitive stocks among the
worst performers," said Heinz-Gerd Sonnenschein, equity markets
strategist at Deutsche Postbank in Bonn, Germany.
In Britain, the Bank of England said that inflation will
fall well below its 2 percent target in two years, even if
interest rates remain at their record low, leaving scope for
further policy easing if the economy worsens. [ID:nBOE004293]
Banks were lower, with Barclays (BARC.L), HSBC (HSBA.L),
Societe Generale (SOGN.PA) and Deutsche Bank (DBKGn.DE) shedding
1.2 to 3.8 percent.
Europe's main barometer of investor anxiety, the VDAX-NEW
volatility index .V1XI, rose to a five week high and German
government bonds rallied as investors' appetite for risk waned
following the U.S. Federal Reserve's gloomier assessment of the
Miners were pressured by falls in the price of copper and
other metals as the dollar rose against a basket of currencies.
Eurasian Natural Resources Corp (ENRC.L), Kazakhmys (KAZ.L)
Vedanta (VED.L) and Xstrata (XTA.L) fell 1.9 to 3.1 percent.
Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX
.GDAXI and France's CAC40 .FCHI declined 1.6 to 1.9 percent.
The Euro STOXX 50 .STOXX50E index of blue chips in the
euro zone shed 1.8 percent to 2,751.31 points, falling below its
61.8 percent retracement of its slide from a high in April to a
low in May of 2,805.69 points and holding above its 50 percent
retracement at 2,736.73 points.
SMITHS GROUP STRONG
Smiths Group (SMIN.L) bucked the weak trend, rising 2.7
percent to extend the previous sessions' gains, as traders cited
break-up hopes for the British technology firm.
On the downside, chipmaker Infineon (IFXGn.DE) fell 2.6
percent, after technology stocks in the U.S. weakened following
Steelmakers ArcelorMittal (ISPA.AS), ThyssenKrupp (TKAG.DE)
and Salzgitter (SZGG.DE) fell 2.3 to 3.7 percent as traders
pointed to increasing pressure on prices and analysts gave a
negative outlook on price development in the coming quarters.
On the macroeconomic front, growth in Chinese investment
and factory output slowed further last month as the government
brought credit growth back to normal after a record lending
spree in 2009 to counter the global financial crisis.
(Editing by Louise Heavens)