European shares sink to lowest since April on concerns over Iraq

Fri Aug 8, 2014 11:03am EDT

* FTSEurofirst 300 down 0.8 pct

* Afren suspends output from Kurdistan, shares weaken

* Nokian Renkaat hit by plummeting sales in Russia

* Monte dei Paschi falls after results

By Tricia Wright

LONDON, Aug 8 (Reuters) - European shares fell on Friday, for the seventh time in eight sessions, on growing nervousness after U.S. warplanes struck Iraq for the first time since American troops pulled out in 2011.

At 1418 GMT, the FTSEurofirst 300 index of top European shares was down 0.8 percent at 1,303.38 points, its lowest level since mid-April.

"There (are) just no buyers out there, and indexes keep breaking support levels one after the other," FXCM analyst Vincent Ganne said.

"People have been caught off guard. The geopolitical risks have been treated as 'noise' by investors in the past few months, but now they suddenly realise that it's much more than just 'noise'."

London-listed oil producer Afren said it had suspended output at its Barda Rash oilfield, the first to shut in Iraqi Kurdistan. Its shares fell 1.3 percent.

The news was met by investors already rattled by tensions between the West and Russia which, along with weak European economic data and the prospect of U.S. monetary tightening, have hit global stock markets in the past weeks.

Germany's DAX, which is dominated by companies heavily dependent on Russian energy, sank to its lowest level since mid-March, down 0.6 percent to 8,987.07 points - a move that saw it breach March's closing low, 9,017. Technical analysts say that marks the end of its long-term uptrend.

The DAX, along with the rest of the market, briefly trimmed its losses earlier in the session when a Russian official said Moscow would continue efforts to de-escalate the Ukraine crisis, only to then go back into deeper negative territory.

"The market has clearly moved into risk-off mode, and investors are likely to sell into any rally (in the DAX)," Charles Stanley's technical analyst Bill McNamara said.

Underscoring the broad market concerns, U.S. funds investing in European equities bled money for the eighth consecutive week in the seven days to Aug. 6, their longest streak of outflows in three years, Lipper data showed.

Fund managers, fearing that the outflows may have further to go, were sticking to the sidelines.

"I don't see this trend reversing very quickly, so I would not step in and buy European shares right now," Hampstead Capital hedge fund manager Lex van Dam said.

In a further negative sign, shares in Nokian Renkaat shed 6.2 percent after the Finnish tyre maker reported a second-quarter operating profit below expectations due to plummeting sales in Russia.

European airlines also fell, with Air France losing 3.9 percent, and Lufthansa down 3 percent.

Russian Prime Minister Dmitry Medvedev said on Thursday Moscow was considering banning European and U.S. airlines from flying transit routes through Russian airspace in retaliation for tougher sanctions from Europe and the United States.

According to data from Flightradar24, Lufthansa and Air France-KLM would be hardest hit by a potential closure of the airspace over Siberia.

Also on the downside, shares in Italy's third-biggest bank, Monte dei Paschi di Siena, dropped 7 percent after it posted a worse-than-expected loss in the second quarter as charges on souring loans rose, underlining the challenges the bailed-out lender still faces to turn itself around.

Britain's Financial Conduct Authority said on Friday it had banned short-selling in shares of the bank, following similar action by Italy's regulator Consob.

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

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

Today's European research round-up (Additional reporting by Blaise Robinson and Francesco Canepa)