* FTSEurofirst 300 down 0.7 pct, Euro STOXX 50 down 1.2 pct
* Poroshenko says Russian forces brought into Ukraine
* ING IM 'overweight' German stocks, citing valuation, euro
* Mining shares drop as iron ore prices sink
By Blaise Robinson
PARIS, Aug 28 European stocks fell on Thursday
as renewed worries over turmoil in Ukraine prompted investors to
cash in some gains following a more than two-week rally.
The sell-off accelerated around midday after Ukrainian
President Petro Poroshenko said Russian forces had entered
Ukraine and the military conflict was worsening after
Russian-backed separatists swept into a key town in the east and
threatened other areas.
At 1422 GMT, the FTSEurofirst 300 index of top
European shares was down 0.7 percent at 1,368.78 points. The
benchmark index had surged 6.3 percent since a low hit on Aug 8.
"Geopolitics is driving the market again, and this latest
escalation in Ukraine comes as European stocks were ripe for a
pull-back," said Alexandre Baradez, chief market analyst at IG
Germany's DAX index - one of the European markets
hardest hit by worries over the Ukrainian crisis and the
economic sanctions taken by Moscow and the West against each
other - tumbled 1.3 percent, with Siemens also down
1.3 percent and Adidas down 2.8 percent.
The violence in Ukraine and tensions between the West and
Russia - a major energy supplier to Europe - have muddied the
forecasts of a number of European blue chips including Adidas,
Carlsberg, Henkel and Rheinmetall
For Patrick Moonen, senior strategist at ING IM, the
Ukrainian crisis has prompted investors to reduce their exposure
to European equities.
"This trend is clearly visible in portfolio flows. Global
institutional equity flows are positive but there is a tendency
out of Europe into the rest of the world," he said in a note.
Within Europe, however, the strategist is 'overweight'
German equities due to the local market's recent
underperformance, the cheap valuations, as well as the weakening
of the euro currency which is "a clear positive for exporters."
German stocks' recent underperformance has dragged the
average price-to-earnings ratio down to a level not seen since
October 2013, according to Thomson Reuters Datastream.
The MSCI Germany index trades at about 12
times expected earnings while the MSCI Europe
trades at 13.6 times earnings, making Germany's P/E ratio
relative to Europe the cheapest in nearly 10 years.
Around Europe on Thursday, the euro zone's blue-chip Euro
STOXX 50 index was down 1.2 percent, France's CAC 40
was 0.6 percent lower and the UK's FTSE 100 index
was down 0.3 percent.
Mining heavyweight Rio Tinto, Lonmin and
Anglo American featured among the biggest losers, down
3.0-3.7 percent, mirroring a 3 percent drop in China's iron ore
futures, which put spot prices on course to hit their lowest
level since 2009.
Spot iron ore prices have fallen more than 34 percent this
year, as tighter credit in China has curbed purchases of
imported cargoes. The rout, fuelled by excess supplies, has
forced Chinese steel mills to resell some cargoes back to the
market as global miners kept on ramping up output.
Bucking the trend, shares in France's Essilor
climbed 4.1 percent after the world's largest maker of opthalmic
lenses forecast full-year revenue growth of more than 13 percent
excluding currency effects following a 7.9 percent rise in
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by Susan Fenton)