* FTSEurofirst 300 down 1 pct; Euro STOXX 50 falls 1.3 pct
* Volatility Index rises by more than 10 pct
* February equity market rally starting to stall
* Allianz falls on asset management weakness
By Sudip Kar-Gupta
LONDON, Feb 27 Downbeat corporate news combined
with escalating political tension in Ukraine on Thursday to
knock back European stock markets, putting a brake on this
month's rally and boosting market volatility.
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.
Problems in Ukraine have highlighted a broader slump in
emerging market economies this year, which impacted equity
markets in January and has 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 peninsula, a day
after Russian President Vladimir Putin ordered military drills
in western Russia near the countries' border.
The euro zone's blue-chip Euro STOXX 50 index
fell 1.3 percent. Germany's DAX, which hit a record
high of 9,794.05 points in late January, 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
But equities remain the preferred asset class for many
The Volatility index is still below its 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.
JNF Capital investment manager Ed Smyth added he was buying
into the DAX at current levels using synthetic exchange-traded
funds (ETFs), as he felt the index would soon recover.
The FTSEurofirst 300 remains up 1.5 percent since the start
of 2014, adding to a 16 percent rise last year.
Record low interest rates set by major 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 equities.
"If the market has another correction, it would be another
reason to buy equities," said Bordier's Juvet.