Europe shares sag as crisis spreads to Netherlands

Thu Nov 15, 2012 1:26pm EST

* FTSEurofirst 300 down 0.9 pct, hits 2-month low

* Dutch, Swiss, German stocks take a hit

* Spanish shares buck trend on bailout expectations

* Risks seen on the upside ahead of U.S. fiscal cliff

By Blaise Robinson

PARIS, Nov 15 (Reuters) - European stocks ended lower on Thursday after data showed the euro zone had slipped into recession, with the Netherlands particularly hard hit.

The FTSEurofirst 300 index of top European shares closed 0.9 percent lower at 1,078.64 points, a level not seen since early September, while Amsterdam's AEX benchmark tumbled 1.8 percent.

The French and German economies both managed 0.2 percent growth in third quarter but the Dutch economy shrank by 1.1 percent, much more sharply than expected.

Shares in Franco-Dutch airline Air France-KLM fell 8.5 percent, telecom group KPN lost 5.3 percent and retailer Ahold shed 2.2 percent.

Swiss and German stocks - which have been strongly outperforming other European markets so far this year - were among the worst hit, with HeidelbergCement down 2.6 percent, ThyssenKrupp down 2.3 percent and Roche down 1.8 percent.

Zurich Insurance Group tumbled 3.9 percent after the Swiss group posted a bigger-than-expected drop in quarterly net profit after a blow to its German general insurance business.

"It's sort of a wake-up call: no country is immune, which in a sense could be seen as a good news," a Paris-based trader said. "With the crisis spreading to the Netherlands, Dutch and German leaders might start to soften their positions on a lot of issues related to the euro zone crisis, so we might get things done."

Bucking the trend on Thursday, Spain's IBEX added 0.3 percent and some euro zone banks rallied on revived speculation that Spain might be ready to seek a bailout, a condition for activating a European Central Bank bond-buying programme.

Credit Agricole climbed 1.5 percent, Banco de Sabadell added 1.3 percent and UniCredit gained 0.7 percent.

However, "we're not getting any 'sell' signals, keeping in mind that just a week ago a lot of indexes were testing year highs. There's no panic," IG market analyst Jerome Vinerier said.

"Short sellers are still very reluctant to bet against indexes, it's a big risk with central banks being so proactive. The short sellers are rather looking for ideas on a stock-by-stock level," he said.

Fears of a deadlock in talks in the U.S. Congress aimed at avoiding a 'fiscal cliff' of automatic spending cuts and tax hikes also rattled investors on Thursday.

But Xavier Lespinas, head of equities at Swiss Life Private Bank, saw scope for gains if the U.S. deadlock is resolved and Spain makes a move. "If we quickly get one of these two triggers, markets can go up 5-10 percent in the short term," he said.

He also sees Washington's budget problems weighing on U.S. stocks. "The arbitrage has already started, if you look at the inflows and outflows on both sides of the Atlantic over the past two weeks."

The FTSEurofirst 300 is down 3.9 percent since a high hit in mid-September, while Wall Street's S&P 500 has lost 8.3 percent over the same period.

Recent data from EPFR Global have shown inflows into to U.S.-domiciled Europe equity funds, while Europe-domiciled U.S. equity funds have suffered record redemptions, signalling a geographical rotation in asset allocation.