European shares drifted lower today after strong gains over the past nine sessions, with euphoria over China's currency move dissipated and with equity investors taking profits from seven-week highs.
The Iseq index of leading shares followed other markets lower. At 9.30am, it was down 17.99 points to 3103.75.
At 8.05am, the FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,051.68 points after hitting its highest closing since early May yesterday following an announcement by China's central bank over the weekend that it would allow more flexibility for the currency.
Big Chinese state-owned banks kept the yuan in check, a day after its biggest rise since the currency was revalued in 2005, indicating Beijing will allow its currency to appreciate at a far slower pace than demanded by its critics in the West.
Financial stocks were among the top losers, with STOXX Europe 600 banking index falling 0.8 per cent. Barclays, BNP Paribas and Societe Generale fell 2 to 3.7 per cent.
Commodity stocks, which spiked in the previous session on expectations that demand for industrial metals and oils will rise in China following the currency move, lost ground.
Miners BHP Billiton, Antofagasta and ENRC fell 1.5 to 2.5 per cent, while oil companies BP, BG Group and StatoilHydro shed 0.7 to 2.1 per cent.
Investors were also cautious ahead of Britain's budget later in the day. finance minister George Osborne was expected to announce big spending cuts and tax rises in what will be the tightest budget in a generation and the first big test for the new coalition government.
Many economists are concerned that tightening policy too fast right now could plunge Britain back into recession. US president Barack Obama called on his fellow G20 leaders last week not to repeat the mistakes of the 1930s.
Charts suggested the FTSEurofirst 300 index could struggle around 1,048 points, its 61.8 per cent Fibonacci retracement of the fall from mid-April to late May. Last week, the index rose to hover above its 200-day moving average, now at 1,027 points, but a fall below the average could trigger more sell-off.
Among individual companies, British Airways said it had agreed a recovery plan for its £3.7 billion pension deficit, potentially removing a final obstacle to its planned merger with Spain's Iberia. British Airways was up 0.3 per cent, while Iberia gained 0.4 per cent.
Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 fell 0.1 to 0.5 per cent. The Thomson Reuters Peripheral Eurozone Countries Index fell 0.3 per cent.