* FTSE 100 down 0.7 pct, mirrors European pullback
* Miners weaken against "risk-off" backdrop
* Investors still see value in equities
LONDON, June 25 UK shares fell sharply on
Wednesday, mirroring losses across European markets, as
escalating violence in Iraq spooked investors.
London's FTSE 100 index fell 0.7 percent to 6,736.61
points by 1450 GMT, trading around two-month lows. Europe's
FTSEurofirst 300 shed 1 percent.
Security forces are fighting rebels for control of Iraq's
biggest oil refinery and despite the fact that the Brent crude
oil price lost ground, equity traders were concerned
enough about the situation to take money off the table, with
risk-sensitive mining stocks among the hardest hit.
"The thing with the Iraq situation is that it could have
further ramifications particularly if the likes of the U.S. and
the UK decide to get involved - particularly militarily. That's
the kind of thing that really gives investors the jitters,"
Hargreaves Lansdown head of equities Richard Hunter said.
Meggitt, a manufacturer of aircraft parts, was
among the worst performers on the FTSE 100, down 3 percent after
a downgrade from JPMorgan.
While analysts and traders reckoned the stock market was
susceptible to more falls at the hands of geopolitical concerns
or factors such as signs of an economic slowdown in China, they
bet on any weakness proving short-lived.
Year-to-date, the FTSE 100 index is broadly flat but still
hovering around seven-year highs.
The European Central Bank's recent move to cut interest
rates to record lows and other central banks' continued
commitment to supporting their economies are providing further
encouragement for investors to buy into equities as loose
monetary policies suppress risk-free returns in other asset
"In a way it's logical to expect a multiple expansion
because all the other asset classes are offering an extremely
low yield - so people are coming back to equities not because
they like equities but because they dislike everything else,"
Fabrice Theveneau, head of equity research at Societe Generale
Corporate & Investment Banking, said.
SocGen is overweight oil stocks.
(Reporting by Tricia Wright and Lionel Laurent; Editing by