European shares retreat from highs as U.S. debt ceiling looms

Reuters

* U.S. debt ceiling uncertainty pushes stock markets offhighs

* FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 falls 0.1 pct

* Luxury goods stocks underperform as LVMH falls

By Sudip Kar-Gupta

LONDON, Oct 16 (Reuters) - European shares retreated frommulti-year highs on Wednesday, with luxury goods stocks amongthe worst performers, as uncertainty over the U.S. debt ceilingcaused some traders to look to sell out for a profit.

Although the majority of investors still expected aneventual deal over the United States' debt ceiling and itsbudget stalemate, some said equity markets would be vulnerableto sell-offs until an agreement was reached.

"If we haven't heard anything by late afternoon, we'll bemoving south," said Berkeley Futures associate director RichardGriffiths.

The pan-European FTSEurofirst 300 index edged downby 0.2 percent to 1,261.13 points in early session trade, afterhaving risen 0.9 percent in the previous session.

The euro zone's blue-chip Euro STOXX 50 index,which had risen to a fresh 2-1/2 year high on Tuesday, fell 0.1percent to 3,001.02 points.

Germany's DAX, which hit a fresh record high of8,820.98 points on Tuesday, was flat at 8,803.50 points.

The STOXX Europe 600 Personal & Household Goods Index, which houses major luxury goods stocks, fell 1.3percent to make it the worst-performing equity sector as it borethe brunt of a 4.9 percent drop at France's LVMH.

LVMH fell after reporting an unexpected slowdown in salesgrowth at its fashion and leather business.

Rival luxury goods group Burberry has also had toface up to signs of a slowdown in the important Chinese market.French investment bank Natixis cut its rating on LVMH to"neutral" from "buy".

U.S. DEADLOCK

The FTSEurofirst 300 index remains up 11 percent since thestart of 2013 while the Euro STOXX 50 is up by 14 percent, butequity markets have slipped back in October after the U.S.government was partially shut down this month followingdisagreement among politicians over the country's budget.

This in turn has led to concerns over country's $16.7trillion debt ceiling, which U.S. Treasury Secretary Jack Lewsaid the government would hit no later than Oct. 17.

No concrete agreement has yet been reached on the matter.

TJM Partners Mike Harris said he would err on the side ofcaution and look to sell shares into any equity market rally.

Others were more positive, arguing they would use any equitymarket pullback to buy up shares for relatively cheap prices asthey felt an eventual U.S. debt ceiling deal would be reached.

"They may extend it for a few months and kick the can downthe road, but the market remains bullish, it's still 'buy on thedips'," said Darren Courtney-Cook, head of trading at CentralMarkets Investment Management.

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