Europe shares hit 1-week low on poor earnings, cautious outlook
* FTSEurofirst 300 index falls 1.1 percent
* Cautious outlook, poor earnings hurt sentiment
* Nokia down 6.9 percent, heaviest FTSEurofirst faller
By Atul Prakash
LONDON, Oct 23 (Reuters) - European shares sank to a one-week low on Tuesday as cautious comments and disappointing earnings from some companies lowered investors' risk appetite, although some analysts said the sell-off presented a buying opportunity.
At 1154 GMT, the FTSEurofirst 300 index was down 1.1 percent at 1,095.80 points after falling as low as 1,094.07, the lowest since mid-October.
Norsk Hydro swung to a net loss in the seasonally weak third quarter and saw another tough year ahead . Alfa Laval missed its earnings forecasts, and Whitbread said it expected sales growth to slow in the second half of its fiscal year due to flat consumer demand.
Shares in the three fell between 1.4 and 5.6 percent, while Nokia slipped 6.9 percent, leading the FTSEurofirst 300 fallers, on its plans to raise 750 million euros ($980 million) via convertible bonds to bolster its cash position.
Analysts said that although the market's longer-term outlook remained positive, equities might face further selling pressure in the near-term.
"My suspicion is that many investors are 'all in' on the equity market. This suggests to us that once 2012 performance targets have been achieved, the temptation to lock in those gains could prove pretty compelling," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.
"Strategically, we retain our long-held preference for quality and defensives generally."
Charts also pointed to a bearish outlook in the near term, with analysts saying the euro zone's blue chip Euro STOXX 50 index could move back towards recent lows after falling below its 50-day moving average. The index was last down 1.3 percent to 2,499.66 points.
Nick Xanders, head of European equity strategy at broker BTIG, said there was a risk of the index retracing back towards its late-August low of 2,400 after failing to break out of the 2,400-2,600 range.
Another sign that the appetite to buy riskier assets was down on Tuesday came from the Euro STOXX 50 volatility index , Europe's widely used measure of investor risk aversion, which rose 7.5 percent to a two-week high. The index, which measures the cost to protect stock holdings against potential pull-backs, usually moves the opposite way to equities.
Traders said doubts over issues such as a slowdown in economic growth in China and the political situation in the United States would prompt investors to stay cautious in the coming weeks, but the longer-term outlook stayed bullish.
"Investors are keeping a close eye on U.S. elections and waiting to see what happens with the 'fiscal cliff' of scheduled tax hikes and government spending cuts. As long as there is no clear answer on these points, the market will avoid having big positions in equities," said Frank Bonsee, equity sales trader at ABN Amro Bank in Amsterdam.
"However, the situation in Europe has improved in the past two-three months. If we get more confidence in the coming months, then we could say that we have taken a big step towards having more clarity on the situation. And that's what investors need now."
The FTSEurofirst 300 has risen 16 percent from a June low and is up about 10 percent so far this year partly on steps taken by the European Central Bank and the region's politicians to tackle the credit crisis.
Societe Generale said it has turned overweight on euro zone equities, thanks to the high yields on offer, an improving risk backdrop and attractive valuations. Europe ex-UK equities now account for 15 percent of its multi-asset portfolio, its maximum and up from 10 percent in September and just 5 percent in March.
Henk Potts, equity strategist at Barclays Wealth, said that any weakness in equities should be used by investors to increase their exposure to an asset class that continues to outperform. He liked technology, energy and consumer discretionary sectors.
Tuesday's sell-off was across the board, with all the sectors on the STOXX Europe 600 falling. Basic resources shares topped the fallers' list by dropping 1.9 percent, mirroring sharp declines in metals prices that fell on persistent worries about global demand. Chemicals fell 1.8 percent, while banks dropped 1.2 percent.