European shares fall as Middle East worries BG, Boygues

Mon Sep 9, 2013 6:33am EDT

* FTSEurofirst 300 down 0.3 pct, Euro STOXX 50 down 0.4 pct

* BG cuts production estimates on Egypt, Norway delays

* Boygues down as Soc Gen flags profit hit from Syria war

By Francesco Canepa

LONDON, Sept 9 (Reuters) - European shares fell on Monday as disruptions to business in the Middle East hurt oil firm BG Group and the threat of a spike in crude prices fuelled profit taking on construction firm Bouygues.

Shares in BG fell 3.9 percent after the group said political and social instability in Egypt was delaying projects and Norway said it would reduce its oil output in 2014.

The stock was the biggest faller on the pan-European FTSEurofirst 300 index, which was 0.3 percent lower at 1,225.96 points at 0958 GMT. The euro zone Euro STOXX 50 was down 0.4 percent at 2,793.55 points.

"It's disappointing in terms of delivery for next year and there are some caveats with regards to the 2015 production, but for reasons that shouldn't be a surprise," said Ivor Pether, senior fund manager at Royal London Asset Management, who owns the stock in his UK Equity Fund.

"The offset (of the disruptions in the Middle East) is the impact on oil prices, which is a net benefit."

Oil prices have risen around 7 percent since late July as expectations of U.S.-led military action against Syria stoked concerns about a broader conflict in the Middle East, which would disrupt oil supply.

Societe Generale cited the impact of higher energy costs on profits as the main reason to downgrade French conglomerate Bouygues to "sell" from "hold", sending the stock down 2.5 percent after a 30 percent rise since late June.

Equity market trading has been choppy over the past month as investors positioned for both a possible attack against Syria and a stimulus cut by the Federal Reserve.

The FTSEurofirst 300, however, is still up 6.4 percent since the start of July, more than twice as much as the U.S. S&P 500 , as improving data in Europe made the region's valuations more attractive to investors.

Europe equity funds extended their longest inflows streak since 2006 in the seven days to last Wednesday, moving against outflows for U.S. and emerging market equity funds, EPFR data showed.

"It's a realisation that tail risks are gone and the data is better," Grant Lewis, head of research at Daiwa Capital Markets, said.

"Whether you get a continuation of equity market strength, I'm not sure. There are still significant challenges in the periphery."

Concerns centre on Italy where parliamentarians meet to consider expelling former prime minister Silvio Berlusconi after his conviction for tax fraud, a decision that could shatter the fragile ruling coalition and plunge the country into fresh political crisis.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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