European shares retreat from multi-year highs as US debt ceiling looms

Reuters

* FTSEurofirst 300 falls 0.5 pct, ESTOXX 50 dips 0.4 pct

* US debt ceiling situation pushes equities off highs

* DAX rose to record high in previous session

* LVMH fall hits luxury goods stocks

* Most Investors still expect eventual U.S. debt/budget deal

By Sudip Kar-Gupta

LONDON, Oct 16 (Reuters) - European shares retreated frommulti-year highs on Wednesday as uncertainty over the U.S. debtceiling caused some traders to trim equity holdings, whileLVMH's slower sales growth hit luxury goods stocks.

Although the majority of investors still expected U.S.lawmakers to eventually reach a deal over the United States'debt ceiling and its budget stalemate, some said equity marketswould be vulnerable to minor sell-offs until an agreement wassecured.

"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 fell 0.5percent to 1,256.74 points in mid-session trade, after havingrisen 0.9 percent in the previous session.

The euro zone's blue-chip Euro STOXX 50 index,which rose to a fresh 2-1/2 year high on Tuesday, fell 0.4percent to 3,001.02 points.

Germany's DAX, which hit a fresh record high of8,820.98 points on Tuesday, slipped 0.2 percent to 8,787.23points.

The STOXX Europe 600 Personal & Household Goods Index., which comprises major luxury goods stocks, fell 1.9percent to make it the worst-performing equity sector as it borethe brunt of a 6.1 percent drop in France's LVMH.

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

"Until we get some clarity on global growth and the realdemand for luxury goods in China, there's good reason to becautious over these luxury retail stocks," said CMC Marketssenior sales trader Matt Basi.

U.S. DEADLOCK

The FTSEurofirst 300 index remains up 11 percent since thestart of 2013 while the Euro STOXX 50 is up 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 the country's $16.7trillion debt ceiling, which U.S. Treasury Secretary Jack Lewsaid the government would hit no later than Oct. 17.

"There's cautious optimism. Nobody really expects the U.S toeffectively shoot itself in the foot," said XBZ European equityoptions broker Mike Turner.

"The Euro STOXX 50 is channeling recent highs and even if wedo slip 50 points if there's no immediate deal, we'd only beeasing out of what is still a bull phase," he added.

Darren Courtney-Cook, head of trading at Central MarketsInvestment Management, also backed using any market declinecaused by the U.S. debt situation to buy up stocks.

"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'," he said.

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