BG leads European shares selloff after warnings on energy production

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LONDON — European shares edged lower yesterday, snapping a three-day rise as heavyweight BG Group led a selloff in the energy sector after warning about production.

Reuters

Shares in BG fell 3,9%, dragging the broader European oil sector 0,7% lower, after the group said delays at projects in Egypt and Norway would reduce its output in 2014.

The stock knocked 6,8 points off Britain’s FTSE 100, which was 4,2 points or 0,1% lower at 6,543 16 points at 0723 GMT. BG was also the top faller on the pan-European FTSEurofirst 300 index, which was 0,1% lower at 1,228 68 points.

The FTSEurofirst 300 had risen 1,4% in the previous three sessions, helped by expectations of continued monetary support from the European Central Bank and the US Federal Reserve.

The ECB reiterated on Thursday it would keep interest rates low to support the region’s economy, while weaker-than-expected US jobs data on the following day raised speculation in equity markets that the Fed might minimise or delay a cut in its asset-purchase programme.

“Ironically, softer data led to a rally in equities overnight and to the extent that tapering comes later that’s certainly better for equity markets in the short run,” Grant Lewis, head of research at Daiwa Capital Markets, said.

“But if tapering is put off because growth is weaker, ultimately that’s not going to be good for equity markets.”

That view contrasted with the reaction on debt markets, where Bund futures dipped on Monday after 13 of 18 primary dealers in a Reuters poll taken after Friday’s data said the Fed would still decide to start reducing stimulus this month.

Equity markets have struggled to make much headway in the past month and trading has been choppy as investors positioned for both a stimulus cut by the Fed and a possible US-led attack against Syria, which it is feared could cause a broader conflict in the oil-rich Middle East. A US Congressional debate on Syria could start as early as this week, keeping traders on edge.

“There is still major geo-political concern in Middle East, with an attack on Syria almost guaranteed now as the US garners more support,” said Ronnie Chopra, a strategist at TradeNext.

He expected traders to start selling the FTSE 100 once it reached 6 600 points.