European shares edge lower after China rate move

LONDON Tue Feb 8, 2011 11:38am EST

LONDON Feb 8 (Reuters) - European shares slipped back from 29-month highs on Tuesday, after China increased interest rates again to fight stubbornly high inflation, raising concerns about economic growth.

Stocks to fall included miners Kazakhmys (KAZ.L), Lonmin (LMI.L) and Vedanta (VED.L), all down 1 percent.

However, some upbeat corporate news helped limit losses for key indexes. UBS UBSN.VX rose 4.3 percent after saying it expects to win more client money for its wealth management business in 2011 and sees a rebound in the investment banking division. [ID:nLDE71625L]

The pan-European FTSEurofirst 300 .FTEU3 index of top shares fell 0.2 percent to a provisional close of 1,174.79 points, having hit its highest close since September, 2008 in the previous session.

Investors became nervous on the global recovery when China's central bank said its benchmark deposit and lending rates would be raised by 25 basis points. [ID:nTOE706030]

"The markets have been relying to some extent on emerging markets growing for an elongated period and if that's being called into question, that's a headwind to equity markets," said Richard Batty, investment director at Standard Life Investments.

(Reporting by Brian Gorman)