By Blaise Robinson
PARIS, March 26 (Reuters) - European stocks slipped in early
trade on Wednesday, giving up some of the previous session's
sharp gains, as miner Xstrata <XTA.L> sank 8 percent after bid
talks with Brazil's Vale <VALE5.SA> <RIO.N> broke down.
But the fall was cushioned by gains in the telecoms sector,
with Vodafone <VOD.L> up 2.4 percent. The world's largest mobile
phone company by revenue said it expects to start receiving
dividends from its U.S. joint venture Verizon Wireless next
year.
At 0950 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.36 percent at 1,261.50 points. The
index surged 3.2 percent on Tuesday, lifted by a rally in banks,
Wednesday's biggest sectoral loser.
"I think that we are reaching a floor, at least for now.
Historically, when the market starts pricing in a recession,
there is a 20 percent drop in stocks. And this time, equities
were not overpriced when the downturn started," said Jean-Luc
Buchalet, CEO of Pythagore Investissement, in Paris.
"There is usually a low point after six months, so this will
probably be sort of a short-term rally as a lot of bad news has
been digested. But we can expect to fall to a new low sometimes
around June."
The FTSEurofirst 300 has lost 16 percent since the start of
the year and is down 23 percent since reaching a multi-year high
last summer, as fears of a U.S. recession and worries over the
impact of a global credit crisis hit stock markets worldwide.
Xstrata was Europe's biggest laggard on Wednesday after
Vale, the world's largest iron ore miner, said talks to buy
Swiss rival Xstrata had failed and that Vale would look at other
potential takeover targets.
In the banking sector, Deutsche Bank <DBKGn.DE> fell 1.9
percent after the German lender said the disruption to revenues
and writedowns on assets stemming from the global credit crisis
could put its profit goal for this year at risk.
The bank said its business in corporate and investment
banking, the areas most directly affected by financial market
turbulence, was likely to be considerably lower in the near
term.
"This can almost be seen as a profit warning. They said they
may need to make further writedowns and that is not good news at
the moment," one trader said.
"(But) the share price might also turn over the course of
the day as markets may see it as a positive sign that Deutsche
Bank cleared the air," he added.
The DJ Stoxx European banking index <.SX7P> was down 0.8
percent, with HSBC <HSBA.L> down 1.2 percent, BBVA <BBVA.MC>
down 0.6 percent and Credit Agricole <CAGR.PA> down 1.6 percent.
Banking shares have been hit over the past eight months by
worries over the impact of rising mortgage delinquencies in the
risky U.S. subprime market that have forced banks to write down
assets.
BRIEF BOOST FROM IFO
The FTSEurofirst 300, on track to record its worst quarterly
performance in nearly six years, briefly turned positive shortly
after an unexpected rise in the German Ifo business sentiment
index, but quickly gave up gains.
The headline Ifo index rose to 104.8 in March from
February's 104.1 and against a consensus forecast for a fall to
103.4.
"The data will come as a setback to the credit market and
curve-steepening prospects," David Brown, chief European
economist, fixed income at Bear Stearns wrote in a note.
"However, we do not see the rise as a sign that the economy
is likely to escape the slowdown in global growth. With many
other areas of the Eurozone economy struggling we still believe
that the ECB will ease rates in the next few months."
Around Europe, Germany's DAX index <> was down 0.2
percent, the UK's FTSE 100 index <> down 0.6 percent and
France's CAC 40 <> down 0.3 percent.
(Additional reporting by Eva Kuehnen in Frankfurt; editing by
Sue Thomas)
