LONDON (Dow Jones)--European stocks shed some of their early gains Tuesday as concerns about the global economic outlook tempered an initially positive move higher.
Markets were mixed as traders and market commentators warned that equities had started to drift, with little direction and a quiet summer setting the tone for the markets.
"Equity markets have failed to restore their upward momentum," commented Cheuvreux. "Has the Summer correction that we had expected already begun?
"The summer doldrums appear to have arrived early this year, on June 11 to be precise... the period of equity recovery may well have peaked on June 11. In any case, it seems to us that we will not go much further than this level through this summer."
By 0755 GMT, the pan-European Stoxx 600 was flat at 201.7. London's FTSE 100 was up 0.1% at 4197.5, Frankfurt's DAX fell 0.1% to 4647.0 and Paris's CAC-40 declined 0.2% to 3076.5.
Investors looked for bargains in the mining and financials sectors after Monday's sell off. However much of the early session's focus was on the construction sector, which is often seen as a keen indicator of economic recovery.
CRH increased 2.3% to EUR15.5 despite its update disappointing the market. The company, which has operations in 35 countries including the U.S., forecast a 40% drop in first-half earnings before interest, tax, depreciation and amortization due to the recession and a difficult trading environment. Analysts warned this could affect other house builders - Wolseley was flat at 1115 pence.
By contrast, U.K. house builder Persimmon was more upbeat. It was up 4.5% at 379.8 pence after saying that improving trends in the first half of the year will continue in the second half, although it remains cautious until mortgage availability improves and employment prospects stabilize.
Elsewhere, the auto sector was down overall. Shares in Peugeot slipped 0.2% to EUR17.3 after it announced that worldwide vehicle sales plunged 14% in the first half of 2009, though this was slightly buffered by government incentives for buyers. The Stoxx Europe auto sector declined 0.4%.
With economic data remaining thin on the ground, equity markets were likely to drift, warned traders. Asian shares were mixed in quiet trade Tuesday, with commodity and energy stocks dragged down by weaker metal and oil prices.
Japan's Nikkei 225 closed down 0.3%, while South Korea's Kospi Composite closed 0.3% higher and Hong Kong's Hang Seng Index was down 0.6%.
On Monday, the Dow Jones Industrial Average rose 0.5%, to 8324.9, just 3.1 points from its session high and after being down as much as 74.8 points. The S&P 500-index gained 0.3%, to 898.7, after also being down during the session. The Nasdaq Composite Index dropped 0.5% to 1787.4.
"The market has been manifesting a great deal of indifference because investors are not sure whether the next move is up 10% or down 10%," said Art Hogan, chief market strategist at Jefferies. "Now we're going to cycle into second-quarter earnings, and that could help determine where we go. We essentially haven't received guidance from corporate America in three quarters, and if we do this time, I suspect it would be a positive catalyst because companies may say things are looking mildly better."
Meanwhile in the currency markets, the dollar slipped against the yen but managed to hold gains against European counterparts.
At 0820 GMT, the euro stood at $1.3922, down from $1.3984 in late New York business Monday. The dollar stood at Y95.00, down from Y95.36.
Ashley Davies at UBS said: "We expect the dollar to firm through the summer months as risk appetite wanes, with upcoming 2Q earnings a possible catalyst."
Meanwhile, crude oil futures pushed higher early Tuesday, rebounding marginally after they had declined for the fourth straight session on Monday, sending prices to a five-week low on worries that a tepid economic recovery will undermine an anticipated boost to oil demand.
However, by 0820 GMT, the August crude contract on Globex stood at $63.55 per barrel, down 50 cents, having settled Monday at $64.05 per barrel, $2.68 lower, on the New York Mercantile Exchange.
Spot gold has also felt pressure from the weakening commodity complex, and at 0820 GMT stood at $922.35/oz, down $2.58 from levels seen in New York late Monday.
European government bond markets opened slightly weaker, reflecting the expected stronger start to the equity markets as investors take on more risk and move away from the safe-haven markets.
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