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. Last Updated: 07/27/2016

U.S. Slide Causes Europe to Fret




LONDON -- Stocks in Europe trimmed early losses, but remained broadly lower by midday Monday amid nervousness over inflation and Wall Street's tumble Friday.


Technology, bank and basic producer issues led the way down early amid fears of higher interest rates, with markets on edge over possible further declines Tuesday with the release of widely anticipated U.S. consumer prices data.


"We're holding up quite well," said Philipp Buchli, vice president of equity sales at Bank Julius Baer & Co. in London.


"There's some anticipation in the market that we're going to see the worst maybe Tuesday intraday, possibly with a recovery before the day is over in the American markets," he said.


At midday, the Dow Jones Euro Stoxx 50 index of Eurozone blue chips was off about 0.8 percent at 3,608. At that level, the index was still 47 percent above its year-ago level of 2,450, and not far off a July lifetime high.


"In the short-term it looks pretty bearish for the Euro Stoxx with interim support around 3,600, but if 3,500 breaks I would be looking to unwind positions pretty quickly. I'd say there's growing downside potential," said Nico Bakker, technical analyst at ABN Amro in Amsterdam.


In Frankfurt, Dresdner Bank was up 0.9 percent after declining to comment on a newspaper report that it and HypoVereinsbank were moving toward a possible merger. HypoVereinsbank was up 0.2 percent. It reiterated that Dresdner was one of several possible merger partners.


German utilities RWE and Veba fell after saying they were selling a joint majority stake in mobile phone operator E-Plus to France Telecom.


A market view that France Telecom may have paid too much for E-Plus depressed the French telecoms heavyweight, which was off 0.9 percent, but off earlier lows in Paris.


Automaker Renault was off 2.9 percent after being suspended in morning trading as Japanese partner Nissan unveiled a massive restructuring plan.


On Friday, the Dow Jones industrial average closed at 10,019.71 after briefly dipping through the key psychological level of 10,000, which it had swept through six months before.


"Psychologically, it had some effect," Buchli said. "But European markets haven't really rallied with the Dow over the past year and I don't expect them to really go down with it either. ... The relationship has broken down somewhat."


The big danger is "an extreme correction" on Wall Street, but he said fundamental conditions do not seem to point to one.


"There's no particular reason why we should go down a long way. The growth scenario is looking better. Interest rates historically speaking are still very low," he said.


"It's easy for us to get excited about these things, but if you put it into historical context we're in a near-perfect situation."


In London, telecoms group Vodafone AirTouch PLC erased an early loss of 2 percent to nudge 0.2 percent higher.


A 2 percent rise in energy giant BP Amoco also helped broad indices fight back from early morning losses.


Volume was low with fewer than 300 million shares changing hands and dealers said there was no real selling pressure.


Japanese shares closed 1.85 percent lower, with shares of big exporters to the U.S. hurt as traders worried about the prospects for a "hard landing" to the U.S. economy.


U.S. Federal Reserve Chairman Alan Greenspan rattled global financial markets with comments late Thursday warning bankers of a potential stock market bubble and advising them to set aside more money as insurance against a big financial market downturn.


Pessimism grew after the U.S. government reported producer prices rose 1.1 percent in September, more than twice what had been expected. The data fanned market speculation that the Fed was set to raise rates for the third time this year.


September U.S. consumer price inflation data is due Tuesday, the anniversary of the October 1987 market crash.


More signs of inflationary pressure could further punish asset markets, analysts said.


"Markets are very jumpy," said Paul Horne, European equity market economist at Salomon Smith Barney. "They will ignore the good news and focus on anything bad," he said.