The recent rally in equity markets has slowed as invetors cash in profits, while there are also worries about high valuations

London (AFP) - Global equity markets faltered Tuesday, pulled lower by Wall Street, where stock prices fell following lacklustre Chinese economic data and mixed earnings from leading US retailers ahead of the key holiday shopping season.

Stronger-than-expected German growth data boosted the euro, which in turn weighed on stock prices in Frankfurt and in Paris, where the main indices ended.

But London managed to hold steady, propped up by bright news from supermarket giant Tesco and mobile phone titan Vodafone, with extra support from a weak pound.

A rally in the euro “has dented the continental markets. The stronger-than-expected growth rate in Germany propelled the (single currency) higher, and in turn dragged the DAX and CAC 40 lower,” said CMC Markets analyst, David Madden.

Germany’s economy grew at a faster pace than expected in the third quarter, fuelling calls for Europe’s powerhouse to loosen the purse strings and invest more.

At the same time, “the slight weakness in the pound has assisted the FTSE 100, and the positive results from Vodafone also propped up the British market as the stock is a large component of the index,” CMC anlayst Madden said.

Oanda analyst Craig Erlam said there were signs “that markets are starting to look a little overextended.”

Following a relatively uninterrupted rally in equity markets over the last couple of months, many market observers were now beginning to “question whether a correction of some kind is both warranted and healthy,” the expert said.

“Despite another strong earnings season, the rally has stalled which suggest we may now be a levels again that investors can’t justify going far above, which may leave them susceptible to a pull back, even one that isn’t particularly large,” he said.

- Tesco, Vodafone soar -

Tesco topped London’s risers’ board, rallying 6.2 percent to 188 pence, after Britain’s competition regulator gave the provisional green light to the supermarket giant’s takeover of wholesaler Booker worth £3.7 billion ($4.8 billion, 4.2 billion euros).

Vodafone stock surged 5.4 percent to 228 pence after the mobile phone group revealed it rebounded back into first-half net profit on cost-cutting and keen demand.

London won extra support from the pound, which slid as official data showed Britain’s annual inflation rate held at a five-year high of 3.0 percent in October.

A weak pound tends to boost the share prices of multinationals.

Meanwhile, investors awaited movement on stalled US tax cuts with fears growing that the reform push could come off the rails.

After weeks of gains fuelled by strong earnings and optimism about the global economy, world markets have been tempered in recent days as dealers cash out and valuations sit unnervingly high.

World markets had surged on hopes for lower taxes when Donald Trump was elected US president one year ago.

Later this week, the US will also release key inflation and retail sales figures, providing markets with more clues about the Fed’s plans for raising interest rates.

- Key figures around 1645 GMT -

New York - DOW: DOWN 0.3 percent at 23,377.84 points

London - FTSE 100: FLAT at 7,414.42 (close)

Frankfurt - DAX 30: DOWN 0.3 percent at 13,033.48 (close)

Paris - CAC 40: DOWN 0.5 percent at 5,315.58 (close)

EURO STOXX 50: DOWN 0.5 percent at 3,556.38

Tokyo - Nikkei 225: FLAT at 22,380.01 (close)

Hong Kong - Hang Seng: DOWN 0.1 percent at 29,152.12 (close)

Shanghai - Composite: DOWN 0.5 percent at 3429.55 (close)

Euro/dollar: UP at $1.1769 from $1.1745

Dollar/yen: DOWN at 113.43 yen from 113.53 yen

Pound/dollar: UP at $1.3124 from $1.3105

Oil - Brent North Sea: DOWN $1.26 at $61.90 per barrel

Oil - West Texas Intermediate: DOWN $1.32 cents at $55.44