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EUROPEAN SHARES FALL ON FED HIKE WORRIES

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EUROPEAN SHARES FALL ON FED HIKE WORRIES

Sept 17, 2014 9:22pm GMT

Stock.com

* FTSEurofirst 300 down 0.3, Euro STOXX 50 down 0.6 pct
* Oil stocks, gold miners fall as dollar strengthens
LONDON, Sept 9 (Reuters) - European shares slipped for a third straight session on Tuesday, with companies that trade dollar-denominated commodities such as oil taking a hit as investors shortened the odds on an early hike in U.S. interest rates.
Research from Federal Reserve economists published late on Monday showed Fed members expect a higher trajectory for interest rates than investors, boosting bond yields and sending the dollar to a 14-month high against the euro.
The FTSEurofirst 300 index of European shares was flat at 1,390.21 points further retreating from a 6-1/2 year high hit on Thursday, at the peak of a four-week rally.
"As the bond markets all gently back up in yield, the equities look round wondering where the prop was that they were resting on," Andy Ash, head of sales at Monument Securities, said.
"Certainly currency moves are still supporting the global dollar carry trade: out of everything else into dollars. That tends to not be good for lesser asset classes in 'everything else' land while the dollar still strengthens."
Crude and other commodities which depend on economic growth fell after the Fed's report, pushing shares in oil majors such as Royal Dutch Shell down 1.3 percent.
On the flip side, the diverging paths of the Fed and the European Central Bank, which cut rates again last week, pressured the euro, boosting the competitiveness of euro zone exporters.
"The earnings momentum has been negative since 2011 and has remained negative so far this year, and currency headwinds have been partly responsible for that," said Ludovic Dufour, portfolio manager at Mandarine Gestion in Paris.
"But given the speed at which the euro is falling now, we may finally see the end of the forecast downgrades."
Analysts at Credit Suisse said they expected the euro's weakness and further stimulus from the ECB to help demand for European steel and upgraded ArcelorMittal to "outperform" from "neutral".

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