European shares dip as investors await cues on policy outlook
By Ankika Biswas
(Reuters) -European shares fell on Wednesday as a rally from last year started to lose steam, with investors keeping an eye out for major factors during the day for cues on global monetary policy.
The pan-European STOXX 600 was down 0.3% by 0923 GMT, after kicking off the New Year on a lacklustre note on Tuesday.
Basic resources was the worst-hit sector, down 1.7% on weakness in most metals. Construction and material, financial services and technology also lost over 1% each.
On the flip side, food and beverages jumped 1.1%, led by a 3% rise in Swiss packaged-food giant Nestle.
Healthcare also enjoyed strong gains, with Swiss drugmakers Novartis (SIX:NOVN) and Roche jumping nearly 4% each.
The focus for the day is on a key U.S. jobs report and minutes from the Federal Reserve's December policy meeting. Meanwhile, regional data showed unemployment in Germany rose slightly in December.
Growing expectations that the European Central Bank will deliver interest rate cuts in 2024 propelled the benchmark STOXX 600 to a 12.7% jump in 2023.
«Markets have swung from being slightly undervalued in the last quarter to being slightly overvalued now… So fundamentally, there's not much headroom to go from here,» said Michael Field, European market strategist at Morningstar.
«But, the positive spin is the market doesn't really care, if the story is sufficiently positive and they think momentum is behind it, then investors will still jump on that bandwagon and ride it on the way up.»
Any shocks on the timing of rate cuts and further worsening of the European economy are some of the key triggers that could test the sustainability of last year's gains.
Multiple analysts, including Field, expect the European Central Bank to
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