* Traders cite concerns over escalating Ukraine tension
* Euro STOXX Volatility Index rises by more than 10 pct
* FTSEurofirst 300 down 1 pct
* Euro STOXX 50 falls 1.3 pct
* February equity market rally starting to stall
* Allianz falls on asset management weakness
By Sudip Kar-Gupta
LONDON, Feb 27 Poor corporate news combined with
escalating political tension in Ukraine on Thursday to knocked
back European stock markets, putting a brake on this month's
rally and causing market volatility to rise.
The pan-European FTSEurofirst 300 index, which
rebounded in February to approach its highest level since May
2008, fell 1 percent to 1,335.02 points in mid-session trading,
adding to a 0.2 percent dip on Wednesday caused by a drop in
luxury goods and financial stocks.
Financial stocks took the most points off the FTSEurofirst
300 on Thursday as well, as Royal Bank of Scotland
slumped 8 percent after posting a loss while insurer Allianz
fell on the back of difficulties at its Pimco unit.
"We're getting to the tail-end of results season, and many
of the results have not been that great. It's also early days in
Ukraine, but the situation over there is making people nervous,"
said Andrea Williams, European equities fund manager at Royal
London Asset Management.
The problems in Ukraine have highlighted a broader slump in
emerging markets economies this year, which impacted equity
markets in January and have hit the earnings of companies - such
as luxury goods groups - exposed to those regions.
On Thursday, armed men seized the regional government
headquarters and parliament on Ukraine's Crimea
The development came a day after Russian President Vladimir
Putin ordered armed forces drills to test combat readiness in
western Russia near the border with Ukraine, prompting a U.S.
warning that a military intervention would be a "grave mistake".
The euro zone's blue-chip Euro STOXX 50 index
fell 1.3 percent while Germany's DAX, which hit a
record high of 9,794.05 points in late January, also weakened by
1.5 percent to 9,525.04 points.
Concerns over the situation in Ukraine caused the Euro STOXX
Volatility index to rise 11.1 percent to 17.93 points -
marking its biggest one-day gain in a month.
EQUITIES STILL PREFERRED ASSET CLASS
Yet in spite of Thursday's rise, the Euro STOXX Volatility
index is still below a 2014 peak of around 24.60 points, and
Michel Juvet - chief investment officer at Swiss bank Bordier -
expected an eventual resolution to the problems in Ukraine.
"If the market has another correction, it would be another
reason to buy equities," said Juvet.
The FTSEurofirst 300 remains up by 1.5 percent since the
start of 2014, adding to a 16 percent rise last year, and
equities are still the preferred asset class for many investors.
Record low interest rates set by major world central banks,
designed to boost the global economy after the 2008 financial
crisis, have hit returns on cash and bonds and driven many
investors over to the better gains available from equities.
However, Darren Courtney-Cook - head of trading at Central
Markets Investment Management - expected more near-term pressure
on equities if the DAX remained below the 9,700 point level.
"If the DAX holds below 9,700, we could be in for further
downside," he said.