Worries about Latam spur selloff in Europe shares

Fri Jan 24, 2014 11:08am EST

* FTSEurofirst 300 down 1.9 pct, hits 3-week low

* Euro STOXX 50 turns negative on the year, breaks key support

* Argentina in spotlight after peso plummets

* Spanish stocks with significant exposure to Latam hammered

* Record weekly inflows from U.S. investors -Lipper

By Blaise Robinson

PARIS, Jan 24 (Reuters) - European stocks suffered their biggest one-day slide in seven months on Friday, as concerns about economies and currencies in Latin America triggered profit taking after a recent sharp rally.

Spanish stocks were among the worst hit, with Madrid's IBEX benchmark dropping 3.3 percent, led by Telefonica down 5 percent, and lenders BBVA, down 5.6 percent, and Banco Santander, down 2.5 percent.

The three Spanish companies derive about half of their revenues from Latin America - the biggest exposure to the region among European blue-chips, according to data from MSCI.

French groups Edenred and Casino, which also have massive exposure to Latin America, were down about 4 percent.

"The sell-off has been sparked by mounting worries over emerging markets, with Argentina in the spotlight today," FXCM analyst Vincent Ganne said.

"Investors are getting nervous about a potentially excessive exposure to equities, and have decided to trim their positions, turning to bonds and gold instead."

Argentina's government decided on Friday to loosen foreign exchange controls, a day after the country's peso suffered its steepest daily decline in 12 years.

At 1525 GMT, the FTSEurofirst 300 index of top European shares was down 1.9 percent at 1,306.96 points, hitting a level not seen in three weeks and suffering its biggest pull-back since June.

The euro zone's blue-chip Euro STOXX 50 index was down 2.5 percent, turning negative on the year and breaking below its 50-day moving average, sending a negative technical signal.

Earlier this week, charts sent a series of bearish signals, flagging up 'overbought' conditions and strong resistance levels, raising the risk of a correction following lofty gains.

"The drop in the IBEX today is essentially an excuse, it doesn't have much to do with Latin America," said Margarita Rivas, sales trader at GVC Gaesco Valores, in Madrid.

"Charts were showing exhaustion and the need for a correction. There's further room on the downside, to around 9,200 points for the IBEX, without reversing the positive medium- to long-term trend."

Despite this week's sell-off, investor appetite for European stocks has remained strong, with weekly investment inflows from U.S. investors hitting a record high in the seven-day period ended Jan. 22.

The Lipper poll of a hundred U.S.-based funds invested in European equities, which include exchange-traded fund (ETFs) holdings, shows the funds poured $1.27 billion into European equities during the seven-day period, the biggest weekly net inflows since Lipper started to monitor the funds in 1992.

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