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London - European shares fell on Wednesday, pressured by autos and banks, as concerns over Greek politics pushed regional indexes nearer to key support levels which, if breached, could trigger further losses.
The FTSEurofirst 300 closed down 0.4% at 1 174.79 points, extending weakness from the previous session when concerns that global central banks were looking to scale back their stimulus knocked the index 1.2% to six-week lows.
Many investors were sticking to the sidelines, evidenced by light trade at 88% of the 90-day daily average, with the stimulus worries compounded by a revival of eurozone fears after the shutdown of the Greek state broadcaster caused tensions in the fragile three-party government.
CMC Markets analyst Michael Hewson said he would be wary of April's low of 6 214 on Britain's FTSE 100, and of the 8 100 points area on Germany's DAX, which are within sight of current levels.
"I would be cautiously long while above these levels - but the fact that there is this debate about the longevity of central bank stimulus means there is potential for a test of these supports," he said. "If they give way (we) could (see) more selling."
Cyclical auto stocks and banks were among the biggest laggards on Wednesday, nursing respective falls of 2% and 1.1%, while defensive areas such as healthcare and food & beverages bucked the weak trend.
"I think the risks are to the downside," said Pieter Fourie, head of global equities at Sanlam Private Investments (UK), who does not believe in buying European cyclical stocks, despite the fact some are looking cheap after recent underperformance.
Sanlam Private Investments has used the recent market weakness to buy into "high-quality" blue-chip names such as brewer Anheuser-Busch InBev, food group Nestle and luxury group LVMH.
The trio trade on respective 12-month forward price/earnings ratios of 19.33 times, 17.80 times, and 17.42 times, according to Thomson Reuters data, against the STOXX 600 on 12.1 times.
There were some bright spots on Wednesday. Clothing retailer Inditex rose 3.5% after it reassured over its margin guidance, while media group Kabel Deutschland soared 8.2% on the back of a preliminary bid approach from telecoms firm Vodafone.
Some investors were relatively sanguine on the prospects for equities, with the FTSEurofirst 300 only 6.5% shy of five-year highs hit towards the end of May, leaving it up 3.6% in 2013.
"What we hope is that equity markets, after suffering this bout of volatility, calm down and we can see more fundamental drivers around earnings, around sales, around margins, come through, and that will be reflected in equity prices," said Shaniel Ramjee, an investment manager at Baring Asset Management, which has £39.5bn ($62bn) of assets under management.
