* FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 off 0.4 pct
* Euro STOXX 50 breaks below support in bearish signal
* Europe stocks benefit from emerging market outflows-SG
* Luxury stocks buck trend as LVMH results reassure
By Blaise Robinson
PARIS, Jan 31 European stocks fell on Friday,
posting their first monthly loss since August and knocked by
concerns that corporate earnings will be hit by turmoil in
Also rattling investors, data showed an unexpected drop in
euro zone inflation, reviving fears that the currency bloc could
be slipping into deflation.
The FTSEurofirst 300 index of top European shares
ended down 0.2 percent at 1,291.17 points, posting a monthly
loss of 1.9 percent. The index dropped as much as 1.6 percent
during the session, before short covering in late trade helped
it trim losses, traders said.
The euro zone's blue-chip Euro STOXX 50 index
ended 0.4 percent lower at 3,013.96 points, with technical
charts showing the benchmark index breaking below a positive
trend line started in June, sending a bearish signal.
The Euro STOXX 50's next target on the downside is 2,916
points, representing a low that was hit in mid-December, and
below that, the index's next big support level will be at 2,877
points, the 200-day moving average.
"It's most likely that the correction goes on until European
indexes test their 200-day moving averages," said Lionel
Duverger, technical trading strategist at B*Capital. "This
should then bring interesting buying opportunities for the
medium to long term, although we're not there yet."
EUROPE MORE EXPOSED THAN U.S.
Financial assets in a number of emerging economies have
recently been rocked by the prospect of reduced stimulus from
the U.S. Federal Reserve. The Fed announced on Wednesday a
second cut in its quantitative easing programme, which had
fuelled a sharp rally in global equities in 2013.
Reduced U.S. stimulus has prompted investors to repatriate
investments from emerging markets, which have suffered massive
outflows and sent a number of local currencies plunging.
European companies with strong exposure to emerging markets
dropped again on Friday, with Austrian lender Erste Group
losing 1.5 percent and global brewer SABMiller
falling 0.5 percent. The two firms derive about two-thirds of
their revenues from emerging markets.
According to data from MSCI, European companies have a much
bigger exposure to emerging markets than U.S. or Japanese
companies: about 24 percent of revenues overall for firms listed
on the MSCI Europe index, versus 15 percent for
the MSCI United States index and 14 percent for
the MSCI Japan index.
Despite the market's recent pull-back, data shows European
stocks continue to enjoy brisk investment inflows, in sharp
contrast with massive outflows rocking emerging market funds.
According to Thomson Reuters Lipper, U.S.-based funds poured
$450 million into European stocks in the week ending Jan. 29,
bringing the total inflows so far this year to $3 billion.
During the same week, U.S. investors pulled $2.6 billion from
emerging markets equity funds.
"We see no early end to emerging market asset de-rating,"
Societe Generale cross-asset strategist Arthur Van Slooten said
in a note, saying European stocks should benefit from
geographical rotation from asset managers.
"The Fed remains assertive on execution of tapering despite
recent turmoil within the emerging market world, which spells
more turbulence ahead. While current emerging volatility is
impacting developed markets as well, some of the flows are being
redirected toward Europe, notably into Italy, Spain and the UK,"
Van Slooten said.
Shares in luxury goods makers bucked the trend on Friday,
recovering from a recent slump after results from Louis Vuitton
owner LVMH eased investor worries about the sector's
outlook given China's slowing economic growth.
LVMH shares jumped 7.9 percent, while Hermes added
4.1 percent. But despite the day's rally, luxury shares remained
in the red this month. The sector, seen as a safe-haven for fund
managers during the heat of the euro zone debt crisis due to its
strong exposure to emerging markets, has recently fallen out of
Interactive map of emerging markets currency performance:
Europe bourses in 2014:
Asset performance in 2014: