German shares lead Europe lower as Ukraine conflict hits economy

Tue Aug 12, 2014 12:41pm EDT

* Germany's DAX down 1.2 pct, FTSEurofirst 300 down 0.2 pct
    * ZEW index, Henkel's guidance show Germany hit by Ukraine
crisis
    * Danish jeweller Pandora rallies after results

    By Francesco Canepa
    LONDON, Aug 12 (Reuters) - German shares led declines in
European stocks on Tuesday as weak sentiment data and a gloomy
outlook from consumer goods group Henkel provided more evidence
the region's largest economy is being hurt by the conflict in
Ukraine.
    Frankfurt's DAX index fell 1.2 percent, the biggest
decline among major regional bourses, after the ZEW survey
showed German analyst and investor morale fell to its lowest in
more than a year in August.
    The survey reflected the turmoil in Ukraine and concern that
sanctions and counter-sanctions between Russia and the West may
affect Europe's industrial powerhouse. German companies exposed
to Russia range from Adidas, the world's
second-largest sportswear firm, to airport operator Fraport
 and defence firm Rheinmetall.
    Henkel warned earnings growth would slow in the
second half of the year, partly because of the friction between
Russia and Ukraine. Its shares fell 5.3 percent.
    A Russian convoy carrying food, water and other aid set off
on Tuesday for eastern Ukraine but Kiev said it would not allow
the vehicles to cross onto its territory, warning against any
attempt to turn the operation into a military intervention by
stealth. 
    "Now you have the Ukrainians not letting the aid convoy in
and that shows (the situation) is very far from being solved,"
Markus Huber, a senior sales trader at Peregrine & Black, said. 
    "It seems the market hasn't made its mind up at the moment
and I haven't seen a clear signal yet that we're turning
around."   
    The FTSEurofirst 300 index of top European shares
closed 0.2 percent lower at 1,320.12 points, after hovering
around the gain line for most of the day.
    The FTSEurofirst is down nearly 6 percent from its July
peak, hit by worries about conflicts from Ukraine to the Middle
East, the prospect of tighter U.S. monetary policy and softer
European economic data.
    "We've already seen the underperformance, so if there is no
new (negative) development and the economy starts doing not so
badly we may have seen the trough for this correction," said
Joost Van Leenders, an investment specialist for allocation and
strategy at BNP Paribas Investment Partners.
    Danish jewellery maker and retailer Pandora was
a sharp outperformer, rising 8.3 percent after it posted
better-than-expected second-quarter results, leading it to raise
its 2014 revenue forecast. 
    As Europe's earnings season draws to a close, STOXX Europe
600 companies have posted a 9.7 percent rise in
second-quarter profits on average. But revenues have slipped 1.1
percent, reflecting Europe's slow economic recovery.
 
    
    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 in Paris; Editing by
Janet Lawrence)
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