European shares tip lower on U.S. data, Russia risk

Mon Jul 28, 2014 12:33pm EDT

Related Topics

* FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 down 0.1 pct

* U.S. data, Russia risk keep activity subdued

* Ryanair, Reckitt outperform on earnings, dealmaking

* German market underperforms on Russia exposure (Adds comment, closing prices)

By Lionel Laurent and Blaise Robinson

LONDON/PARIS, July 28 (Reuters) - European stocks edged lower on Monday, with unspectacular U.S. data and new European sanctions against Moscow offsetting strong earnings updates from firms like Ryanair and spin-off talk from Reckitt Benckiser.

European equities have barely budged from their levels at the end of June, inching back from multi-year highs on doubts over the pace of economic recovery in the euro zone and the impact of conflicts in Ukraine and across the Middle East.

The pan-European FTSEurofirst 300 index closed down 0.2 percent at 1,369.61 points, while the euro zone's blue-chip Euro STOXX 50 index was down 0.1 percent.

An unspectacular reading for new business and employment growth in the U.S. services sector, along with an unexpected drop in U.S. pending home sales for June, weighed on trading.

Sentiment was subdued overall, with investors looking ahead to a busy week of data and earnings from the U.S. and digesting a recent batch of mixed trading updates from European firms.

"The U.S. PMI was slightly softer (than expected)," said Jasper Lawler, analyst at CMC Markets.

Investors also held back from placing big bets as geopolitical risks remained in focus. Russian markets tumbled for a third straight session after the EU reached an outline agreement on its first economic sanctions on Russia since the downing of a Malaysian airliner over East Ukraine.

Meanwhile, in the Gaza Strip, a huge explosion in a public garden killed eight children and two adults and wounded 40 others, Palestinian medics said on Monday. Locals blamed the blast on an Israeli air strike but Israel denied responsibility, saying it was a misfire by a rocket launched by Hamas.

"Tensions in Ukraine and Middle East, recent nasty surprises in the earnings season... There's just a lack of visibility at the moment which is prompting investors to just stay on the sidelines," Talence Gestion fund manager Alexandre Le Drogoff said.

Airline Ryanair and consumer-goods group Reckitt Benckiser were among the outperformers, with both up 2.7 percent after a blowout quarter for the airline led it to raise its profit forecast and after Reckitt said it planned to sell its heroin-addiction treatment, worth $4.9 billion by some measures.

France's Danone was also among the top gainers, up 0.9 percent following a report that the food and beverage major is in talks to sell its medical nutrition business to U.S. group Hospira in a deal valuing the unit at about $5 billion, or 3.7 billion euros.

"In the past, the price mentioned was 3 billion euros, so this 3.7 billion euro tag is a better price," a Paris-based trader said.

On the downside, German automakers Daimler and Porsche and Austrian lender Raiffeisen Bank were both down over 3 percent. Banking-technology group Wincor Nixdorf also fell 4.5 percent after it slashed its sales forecast.

Germany, a top trading partner of Russia, is seen by investors as relatively more exposed to the Ukraine crisis than other markets. The Frankfurt blue-chip DAX index was down 0.5 percent, underperforming the French CAC 40 and the UK FTSE 100.

There was mixed news from the financial sector. Spain's Bankia reported a near-doubling of quarterly profit on the back of a sustained recovery for the country's banking sector, though Germany's Commerzbank unveiled more pain ahead as part of a wider savings programme that will cost more jobs.

Lloyds Banking Group ended the day flat after agreeing to pay fines totaling $370 million to U.S. and British authorities investigating its part in a global interest-rate-rigging scandal and manipulating fees for a UK government lending scheme.

Emerging markets-focused fund manager Aberdeen Asset Management fell more than 5 percent after it said assets under management dipped in the June quarter, with clients withdrawing 8.8 billion pounds ($14 billion).

Data showed a sharp rise in profits earned by Chinese industrial firms, up 17.9 percent in June from a year earlier, fuelling expectations that the world's second-largest economy is powering through its recent soft patch as the government uses targeted stimulus measures to support growth.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (Editing by Tom Heneghan)

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