European shares steady, Dassault slips on growth warning

Reuters

* FTSEurofirst 300 steadies in morning trading

* Tech shares lead a sell-off in cyclicals

* Dassault slumps after warning on growth

By Atul Prakash

LONDON, Oct 14 (Reuters) - European shares held steady earlyon Monday, with investors taking a cautious stance after U.S.politicians failed over the weekend to resolve budget issues andthe world's biggest economy moved closer towards a debt default.

Equities had rallied on Friday on expectations a deal to endthe fiscal crisis could be reached over the weekend. SenateMajority Leader Harry Reid and Republican leader Mitch McConnellheld talks that Reid later called "substantive", but investorswere not convinced about an imminent deal.

Figures showing China's exports fell in September also hurtsentiment as the data disappointed investors who were banking onthe continuation of recent positive numbers signalling theeconomy was gaining strength.

"It's a difficult start into the new week, with no realprogress to resolve issues related to the U.S. shutdown and debtceiling and disappointing Chinese exports data hurtingsentiment," said Christian Stocker, strategist at UniCredit.

"Investors should focus on the earnings season. I expect amore positive tone from European companies as the economicenvironment in the region has stabilised in recent months.Equities need an end of the negative earnings revisions and thatshould happen with a more positive outlook from companies."

Major U.S. companies announcing results this week includedCitigroup, Intel, Johnson & Johnson,Yahoo, Bank of America Corp. and Goldman Sachs

. The third-quarter European earningsseason will gather momentum in the last week of October.

At 0800 GMT, the FTSEurofirst 300 index of of topEuropean shares was flat at 1,250.46 points after opening lower.It rose in the previous two sessions and is still up more than10 percent after recent weaknesses.

Cyclical shares were among the top decliners on concernsthat any impact of the budget impasse in the United States onits economy and slower growth in China could hurt sectors suchas financials, miners and technology.

The STOXX Europe 600 technology index was weakest, down 1.2 percent, led by a 7 percent drop in French softwaremaker Dassault Systemes, which warned that revenuegrowth will be sharply lower than expected this year due tosluggish orders, especially in Asia.

The auto sector fell 0.7 percent, while constructionshares dropped 0.3 percent.

On the positive side, Johnson Matthey rose morethan 4 percent to top the list of the FTSEurofirst 300 gainers,with traders citing a note by JP Morgan, in which the bankupgraded its stock to "overweight" from "neutral" and saw apotential upside of 35 percent to the current price.

"Johnson Matthey is at an inflection point. We expect yearsof investment in the industrial catalyst market to lead toaccelerated growth, benefiting from the swathe of new customercapex driven by Chinese petrochemical self-sustainability andthe U.S. shale gas revolution," JP Morgan said.

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