European shares retreated from six-week highs on Tuesday, as concern about the earnings outlook prompted some investors to book profits, with Swedbank hit after its results lagged market forecasts. The Swedish bank dropped 3.9 percent after it posted a fall in second-quarter earnings and said margins could be weaker in the coming months as a result of increased competition in the country's mortgage market.
The FTSEurofirst 300 index of top European shares ended 0.7 percent lower at 1,191.15 points. The index is up more than 8 percent from an early June low. "Recent price gains have prompted some investors to book profits. People are also cautious because of concerns that the second-quarter earnings season might disappoint," Christian Stocker, equity strategist at UniCredit in Munich, said.
The German ZEW economic think tank's monthly poll of economic sentiment unexpectedly fell to 36.3 from 38.5 in June, against expectations of a rise to 39.6. Stocker said he was "underweight" European autos as earnings expectations for the sector were too high. New car registration figures showed the second quarter was quite bad for automakers and that will get reflected in the earnings numbers, he added. Figures showed European car sales slumped to their lowest in 20 years in the first half of 2013.
Charts suggested further weakness for the Euro STOXX 50 index, which fell 0.8 percent to 2,665.61 points. Michael Riesner, head of equities technical analysis at UBS, said the recent bounce of the Euro Stoxx 50 was in a maturing phase and a daily close below 2,666 might create a tactical reversal pattern.
Murray Gunn, HSBC's head of technical analysis, said the Euro STOXX 50 had a bearish Elliott Wave structure and a fall through 2,539 would be the first sign that a third wave moving lower was under way. The Elliott Wave theory says prices follow a pattern of three waves up and five waves down. Among other sharp movers, the media sector fell 1.5 percent, led lower by SES, one of the world's largest commercial satellite operators. SES fell 1.4 percent following a bearish Morgan Stanley note that said overcapacity could be a more serious issue than the industry was expecting.
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