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Europe stocks sag on US consumer confidence data

FRANKFURT - European shares lost earlier gains in late trading on Tuesday after US consumer confidence came in at a nine-month low and oil prices fell below $70 per barrel as a tropical storm headed away from production areas.

“The euphoria came to an end in Europe after the Dow Jones went down,” said Frank Schallenberger, an equity strategist at German bank LBBW.

“The weak US open on consumer confidence is hitting the markets as well as lower oil prices, with some of the oil heavyweights dragging on the indices,” said Lawrence Peterman, investment director at stockbroker Eden Financial.

The US Conference Board’s consumer confidence indicator fell to 99.6 in August from an upwardly revised 107.0 in July as worries about job growth and the economy overshadowed the Federal Reserve’s recent pause in some two years of raising interest rates.

Economists polled by Reuters had forecast a median reading of 103.0 in August.

The pan-European FTSEurofirst index of 300 leading shares closed unofficially 0.2 percent higher at 1,367.40 points, after earlier hitting its highest intraday level since May 12.

That was the day that inflation and interest rate worries sent European shares down nearly 2 percent. Nearly four months later, these uncertainties are still present in the investors’ minds, but recent mixed US economic data and a drop in oil prices have helped quell fears of aggressive Fed monetary tightening.

Some analysts see a positive side in the slowdown of the US economy.

”This could also be positive news,” LBBW’s Schallenberger said. “Weak US macro data makes it less likely that the Fed will raise interest rates again.”

US crude oil futures fell below $70 a barrel as tropical storm Ernesto headed toward Florida, sparing oil production sites in the US Gulf of Mexico.

Trading volumes in European stocks were still low as many investors came back from a three-day holiday weekend in Britain, and markets awaited the publication at 1800 GMT of the minutes of the Federal Reserve’s last interest rate meeting.

Vodafone was the most traded at 252 million shares, one-fifth below the stock’s daily average over the past 30 sessions.

The Fed minutes will help clarify whether the US central bank is likely to keep interest rates on hold after pausing at 5.25 percent at its Aug. 8 meeting.

Among this week’s crucial US economic agenda items are also Friday’s non-farm payroll as well as speeches by Fed Chairman Ben Bernanke.

It was a mixed performance across Europe, with London, Paris and Zurich closing higher, while Frankfurt and Milan closed lower.