European stocks dipped on Monday, taking a breather following a sharp rally in recent weeks as investors awaited details of expected new central bank measures to boost economic growth.
Spanish stocks dropped, with Madrid's benchmark IBEX down 0.8 per cent, after revised data showed Spain's economy contracted by more than previously estimated in 2010, and grew by less than first published in 2011, reigniting fears about the country's ability to rein in its public deficit.
At 1014 GMT, the euro zone's blue chip Euro STOXX 50 index was down 0.1 per cent at 2,432.81 points, managing to hold above a key support level, the long-term trendline formed by its 2011 and 2012 peaks.
“People have been focusing on the prospect of ...the ECB (and the Federal Reserve) buying bonds, but at the end of the day, I seriously doubt these measures will have a significant impact on the real economy,” a Paris-based equities and exchange-traded fund trader said.
“The systemic risks have somewhat abated, which explains the summer rally. But beyond that, stocks won't move higher unless things improve on the macro front.”
The Euro STOXX 50 index gained nearly 16 per cent after ECB President Mario Draghi said in late July he was ready to do whatever it took to preserve the euro, sparking hopes the central bank would start buying Spanish and Italian bonds to lower the two countries' high borrowing costs.
The index started to retreat last week, though it managed to bounce off the first big retracement level of its summer rally, the 23.6 per cent Fibonacci retracement, at 2,411.08 points.
Trading volumes were extremely thin on Monday as UK markets were closed for a public holiday.
Spanish and Italian banks fell, with Banco Santander down 1.3 per cent and UniCredit down 0.8 per cent.
Awaiting Jackson hole
Nokia, the world's No 2 cellphone maker, surged 11 per cent, boosted by news that bigger rival Samsung Electronics had lost a costly court case against Apple.
A US jury found the South Korean company had copied critical features of the hugely popular iPhone and iPad and awarded the US company $1.05 billion in damages.
Nokia and its software partner Microsoft have been struggling to compete against Samsung's market-leading Android-powered smartphones.
European stocks were expected to remain rangebound ahead of the much-anticipated annual meeting of central bankers at Jackson Hole, Wyoming that starts on Friday.
US Federal Chairman Ben Bernanke has used previous such gatherings to signal further policy easing. Investors also awaited details of an ECB plan to start buying Spanish and Italian bonds to help ease the euro zone debt crisis.
Eric Galiegue, head of Paris-based financial research firm Valquant, said any new round of quantitative easing from the Fed would not be a silver bullet and that stocks might have got ahead of themselves.
“Monetary policy easing is becoming less effective while global growth is stalling, which is darkening the outlook for 2013 for the world economy,” he said.
“The slump in exports in Japan, Taiwan and Korea in July underscore the risk of a global recession despite the loose monetary policies.”
Germany's Ifo think tank said on Monday its business climate index fell to 102.3 in August, dropping for the fourth month running to its lowest level since March 2010.
Around Europe on Monday, Germany's DAX index was flat, France's CAC 40 down 0.1 per cent and Italy's FTSE MIB down 0.2 per cent.
But the equity derivative markets was sending bullish signals, with the most in-demand call strike on the September Euro STOXX 50 at 2,600 points, or around seven per cent above the actual market level, according to Societe Generale analysts.
Next most traded are a call at 2,500 points, which kicks in after a three per cent rise in the underlying cash index, and a put at 2,300 points, equivalent to a six per cent fall from current levels.
As at the end of trade on Friday, the put-call ratio on the E-STOXX 50 was at 0.86, indicating more calls were traded than puts. A ratio below 1 usually signals bullishness.