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Europe: Shares hit 8-week lows as commodity weakness weighs


[MILAN] A fall in commodity stocks and sustained profit-taking sent European shares to an eight-week low and their seventh straight session of losses on Wednesday, but Airbus rallied after winning a record plane deal.

Crude oil's price slide on worries over the outlook for demand and weaker metal prices weighed on mining and energy stocks like Rio Tinto and Royal Dutch Shell.

Their falls helped send the pan-European Stoxx 600 index down to its lowest level since Sept 20. It closed 0.4 per cent down, slightly off its earlier lows.

This was the index's seventh straight session of losses, its longest losing streak since October 2016 when markets fell in the run-up to the US presidential election.

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Britain's top share index FTSE 100 declined 0.4 per cent and Germany's export-oriented DAX index fell 0.6 per cent, weighed down by a stronger euro.

Autos were also among the biggest losers, down 0.9 per cent, but falls were spread across sectors as investors continued to take profits following this year's rally.

The Stoxx 600 is still up nearly 6 per cent so far this year.

Deutsche Bank strategists led by Sebastian Raedler expect the Stoxx 600 to end the year at 395 points, 3 per cent above current levels, before falling back to 375 in the first months of 2018.

"We remain tactically neutral near-term, but expect a pull-back ... We are underweight European cyclicals versus defensives - and expect European equities to continue underperforming U.S. equities over the coming months," they said.

Some investors have reduced their exposure to European equities to position themselves for a correction even though they do not expect the underlying positive trend to change, given continued strength in economic data.

On the earnings front, data from Thomson Reuters IBES shows 50 per cent of companies listed on the euro zone MSCI EMU index have beaten analyst expectations while 40 per cent have missed them. Earnings beats stand at 54 percent for the broader MSCI Europe index and at 72 per cent for the US's S&P 500.

Among oil firms Tullow Oil led losses, down 5.2 per cent while services company TechnipFMC and Austrian refiner OMV also dropped 3.2 to 4.3 per cent.

Germany's Lanxess fell 3 per cent after its earnings update did not provide any positive surprise.

"Third quarter numbers are okay whereas the portfolio change and the execution of Lanxess' strategy is going as planned,"said Baader Bank Helvea analyst Markus Mayer in a note.

Potash miner K&S sank 4.8 per cent after it missed profit expectations.

On the positive side, Airbus rose 2.4 per cent, providing the biggest boost to overall index gains.

Airline pioneer Bill Franke placed a historic order for 430 A320neo-family jets in a deal worth US$49.5 billion at list prices that marks a dramatic turnaround for Airbus, which had been lagging behind Boeing in the contest for orders.

The deal is one of the industry's biggest by volume, and the most planes sold by Airbus in one batch.

Shares in telecoms and cable firm Altice jumped 8 per cent after the company appeased investors by announcing a shift in focus from acquisitions to reducing its 50 billion euro (S$80 billion) net debt.

Wind turbine makers Vestas Wind and Siemens Gamesa also rose 5.2 and 3.3 per cent, recovering from sharp losses in the previous sessions.