* Euro STOXX 50 Volatility Index up 8 pct
* FTSEurofirst 300 down 1 pct
* FTSEurofirst set for lowest close since mid-December
* Emerging markets worries continue to weigh
By Sudip Kar-Gupta
LONDON, Feb 3 European shares fell to their
lowest level in more than a month on Monday, knocked back by
data showing China's economy losing momentum and by growing
worries about the impact on companies from emerging market
The pan-European FTSEurofirst 300 index, which in
January had its first monthly loss since August, was down by 1
percent at 1,277.77 points in late session trading.
The euro zone's blue-chip Euro STOXX 50 index
also declined by 1.4 percent to 2,972.64 points, while
uncertainty over the near-term outlook drove up the Euro STOXX
50 Volatility Index by 8 percent to 23.56 points.
Fresh evidence of a slowdown in economic growth in China
came after China's official Purchasing Managers' Index (PMI)
dipped in January.
Emerging markets, which depend heavily on investment from
the likes of China and the United States, have been hit by this
uncertainty over the outlook for China and a scaling-back in
U.S. economic stimulus measures.
The winding-down of the U.S. Federal Reserve's bond-buying
programme has pushed up returns on U.S. Treasuries, causing
investors to buy back into Treasures while selling out of
emerging markets assets.
"What's been interesting has been the scale and the rapidity
with which the emerging markets have unwound," said Christopher
Mahon, director of asset allocation research at the Global Multi
Asset Group at Barings.
"Although we don't think equities will do badly, and will
end up higher than they were at the start of the year, we think
it will come with more volatility than 2013 had," added Mahon.
TOO RISKY TO BUY ON THE DIP?
Shares in companies with a significant exposure to emerging
markets fell sharply. Cement maker Lafarge fell 3.8
percent while Spanish bank Banco Santander - which is
exposed to Latin America - also weakened 2.8 percent.
The STOXX Europe 600 Banking Index was also knocked
by a 6.8 percent fall at Swiss bank Julius Baer after
the company posted lower-than-expected earnings.
In spite of the current emerging market turmoil, many
investors with a long-term view over the whole of 2014 remain
optimistic for the prospects for European equities this year.
Such investors say European stocks should gradually move up
over the course of the year as the region's economy slowly
However, those with a more short-term view said now was not
the time to go back into the equity market.
Montaigne Capital fund manager Arnaud Scarpaci said the Euro
STOXX 50 could soon fall back to the 2,700-2,730 point range
while David Thebault, head of quantitative sales trading at
Global Equities, also expected more near-term volatility.
"It's not yet time to buy this dip," said Thebault.