Awwal 10, 1432 / April 14, 2011, SPA -- European stocks retreated on Thursday as lingering worries about the euro zone debt crisis hurt banks in the peripheral countries, while miners fell on concerns high inflation in China could lead to more tightening, according to Reuters. At 1144 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,129.16 points after rising 0.7 percent in the previous session. Financials were among the top losers, with the STOXX Europe 600 banking index falling 1.4 percent, as markets speculated over whether Greece will be forced to restructure its massive public debt. The cost of insuring Greek government debt against default hit a new record high. "Whenever we get European sovereign debt concerns, that seeps down to the banks given their holdings of those sovereign debts across the continent," said Keith Bowman, equity analyst at Hargreaves Lansdown in London. Greek bank shares fell 4 percent, the broader stock market dropped 2.2 percent, while National Bank of Greece declined 4.7 percent. Miners also lost ground, with the STOXX Europe 600 Basic Materials index down 0.8 percent, as metals fell after Hong Kong media reported Chinese inflation in March accelerated to as fast as 5.4 percent from a year earlier, reinforcing the government's vow to rein in price rises. "If there is a big shock in China then that's a huge negative," said Felicity Smith, fund manager at Bedlam Asset Management, which manages $700 million. "A cooling off period for stocks will not be surprising. If you continue to get an unravelling political situation in the Middle East then that would further squeeze oil supplies and put more inflationary pressure into the system." Smith said pharmaceutical shares were interesting as valuations were low and margins of the companies were good despite price cuts. Firms with interesting new products had good pricing power even in peripheral euro zone countries, which had introduced several austerity measures to manage their debts. TECHNICAL OUTLOOK Technical analysts said that despite some weakness in equities, the market had potential to gain in the medium term. Bill McNamara, technical analyst at Charles Stanley, said the Euro STOXX 50 index's recent rebound from a low of 2,717 in mid-March showed the bull case for stocks stayed intact. The blue chip index was down 1.2 percent at 2,913.26. "If one draws a trendline through the peaks that formed in August and November last year, it becomes apparent that the recent top at 2,991 was not altogether arbitrary. It is this line, which is likely to provide the next resistance area should the index exceed its recent highs." He saw support at around 2,888, the intermediate peak last November and a 38.2 percent retracement of the recent rally from the lows. Only a break below 2,750 would confirm the uptrend was coming to an end, he added. An options trader said volumes in DJ Euro STOXX options were relatively subdued and most participants had already rolled their April positions into longer-dated expiries. The biggest trade on Thursday had been in the June 2012 expiry, where over 100,000 options had traded in the 2,800 and 2,200 puts as a spread. Implied volatility remained low, with near month implied volatility at around 17 percent, which was towards the bottom end of its recent range, he said. British consumer goods group Reckitt Benckiser fell 6.2 percent, while volumes were 495 percent of its 90-day daily average after the company shocked investors by saying its 54-year old star CEO Bart Becht is to retire.
