By Blaise Robinson
PARIS, Feb 5 (Reuters) - European stocks slipped in early
trade on Tuesday, ending a three-day winning streak as miners
surrendered some recent gains on mixed metal prices while
banking shares fell, tracking a drop by U.S. peers overnight.
But the fall was cushioned by rising energy shares, led by
BP <BP.L> as news of a more generous dividend policy by the oil
firm eclipsed weak quarterly results.
BP <BP.L> gained 2.6 percent, Total <TOTF.PA> rose 1.3
percent and Royal Dutch Shell <RDSa.L> added 1.9 percent.
At 0958 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.7 percent at 1,347.35 points. The
index has lost about 10 percent so far in 2008.
In the mining sector, Anglo American <AAL.L> fell 2.3
percent, Rio Tinto <RIO.L> shed 1.8 percent, and Xstrata <XTA.L>
lost 1.4 percent.
The DJ Stoxx basic resources index <.SXPP> has lost 3.4
percent since the start of the year, the best relative
performance among European sectors.
Shanghai copper prices were up in anticipation of healthy
demand after the Chinese New Year holidays, while zinc and
aluminium dropped as investors took profit following recent
gains.
Gold prices were also on the downside in London, falling
more than 1 percent on profit-taking after hitting a record high
on Friday.
Among the banks, UBS <UBSN.VX> dropped 2.3 percent and
Credit Suisse <CSGN.VX> lost 2.4 percent. Both Citigroup and JP
Morgan cut their share price targets on the two Swiss banks.
"The sharp swings on shares of financial institutions is a
sign that uncertainty is still really high. People use every bit
of news to buy or sell. But the subprime crisis is far from over
and I don't see how the market could rally," Jean-Francois
Virolle, chief strategist at Global Equities, in Paris.
"People are waiting to see what the Bank of England and the
European Central Bank will do and say later this week."
Interest rate decisions by both central banks are expected
on Thursday.
The drop in the European banking sector followed a similar
decline among U.S. banks on Monday, falling after brokerage
downgrades on signs consumers are falling behind on debt
payments.
WEAK PMI IN EUROPE
Adding to the gloom on Wall Street, data showed new orders
at U.S. factories rose at a slower-than-expected 2.3 percent
rate last month. After stripping out the transportation sector,
the gain was a modest 0.7 percent, fuelling worries over the
prospect of a U.S. recession.
Weak data also dampened the mood in Europe on Tuesday. Euro
zone services sector growth slowed much more than expected to a
four-and-a-half year low in January although growth in prices
charged barely slipped, a key survey showed on Tuesday.
Spain's service sector shrank at its sharpest ever rate as
evidence grew that the economy is slowing more than anticipated.
"The sky is tumbling in on the Spanish services sector,"
Bear Stearns analysts wrote in a note.
"If the ECB are listening to problems in Southern Europe
they should be racing to the tape to cut rates. With Italy
heading for recession this year, Spain's economy in trouble and
growth prospects slowing sharply in Portugal, the ECB should be
tipping the policy pendulum to easier rates a lot sooner than
expected," they wrote.
Around Europe, Germany's DAX index <> was down 0.7
percent, UK's FTSE 100 index <> down 0.7 percent and
France's CAC 40 <> down 0.7 percent.
Corporate Express <CXP.AS> jumped 27 percent after Dutch
newspaper Telegraaf reported that the Dutch office goods
supplier was in early talks to be bought by U.S. rival Staples
<SPLS.O>.
Heidelberg <HDDG.DE> tumbled 9 percent after the world's
biggest maker of printing machines lowered its outlook and
reported lower-than-expected third-quarter earnings.
(editing by Elizabeth Fullerton)
