European shares on Monday couldn't hold early gains for the second session in a row, as fears of a recession knocked companies particularly exposed to economic shifts, such as metals producers, technology providers and construction firms, according to AP. The pan-European Dow Jones Stoxx 600 index closed 0.2 percent lower at 351.27, with French construction group Vinci , Anglo-Swiss metals group Xstrata and microchip maker Infineon Technologies all posting losses. Vinci shares fell 6 percent, Xstrata also lost 6 percent and Infineon slipped 4.2 percent. The losses for cyclical plays offset strong gains for companies in sectors that are less attuned to economic cycles, including health care, utilities and telecommunications. Standout shares included GlaxoSmithKline, up 3.5 percent in London, while Electricite de France gained 1.4 percent and France Telecom added 3.7 percent in Paris. By region, the French CAC-40 index advanced 0.1 percent to 5,452.83, and the German DAX 30 index added 0.1 percent to 7,817.17. The U.K.'s FTSE 100 index ended 0.2 lower at 6,335.70. Investors resorted to defensive plays after weak U.S. employment data reported on Friday brought back into focus worries about the potential knock-on effect for earnings tied to a slowing economy. Earnings expectations for 2008 «are too high, in our view, and we advise starting the year with a defensive portfolio structure,» said Societe Generale's European equity strategists. They prefer consumer staples, including pharmaceutical and utility firms. U.S. shares turned lower in early trading but then clawed back modest gains. Banking shares were generally lower on Monday. Analysts at Keefe Bruyette & Woods cited concerns over the economic outlook as a reason to downgrade the sector to underweight. «A poor economic outlook for Europe and the U.S. changes everything,» analyst Vasco Moreno said in a note to clients. Many European banks have been forced to write down asset values in the recent credit crunch. Fears of further write downs lingered on Monday, with shares of Swiss bank Credit Suisse down 2.6 percent amid speculation in the local press that it could reveal a fourth-quarter write-down. Meanwhile, shares of Deutsche Bank moved down 0.6 percent. Credit Suisse downgraded the German banking giant to underperform from outperform, saying it sees it as less solid than UBS, the other investment bank in its coverage. UBS shares dropped 2.6 percent. Economic data out Monday showed that economic sentiment weakened in the euro area in December, falling to 104.7 from 104.8 in November, while consumer confidence was flat at a month-on-month reading of -7, according to the Eurostat agency. «Survey data point to moderating activity. We expect GDP growth to be around 1.5 percent in 2008, well below the potential rate,» said European economists at BNP Paribas. Other movers included EADS , which fell 7.5 percent after Deutsche Bank downgraded the European aerospace giant and Airbus parent to sell from hold. The downgrade reflects Deutsche Bank's expectation of wavering fundamentals for the sector in 2008 and of Airbus order momentum turning weaker.
