* FTSEurofirst 300 down 0.6 percent
* Worries over Chinese growth, Ukraine weigh on sentiment
* Morrison's warning sets off sell-off among UK retailers
By Tricia Wright
LONDON, March 13 European stocks fell on
Thursday, extending a two-week slide, as worries over economic
growth in China and tension in Ukraine took their toll on market
A sell-off among UK retailers after a profit warning by
Morrison's also kept investors on edge.
Concern about China intensified after data showed its
economy slowed markedly in the first two months of the year.
Growth in investment, retail sales and factory output have all
dropped to multi-year lows.
Investors were also wary about developments in Ukraine
before Sunday's referendum in Crimea, which investors worry
could bring harsh Western sanctions against Russia.
Germany's Angela Merkel warned Moscow that it risked
"massive" political and economic damage if it refused to change
course on Ukraine, saying Western leaders were united in their
readiness to impose sanctions on Russia if necessary.
"Investors are just concentrating on China and the Ukraine,"
IG market analyst Chris Beauchamp said. "I don't think we'll see
much progress (in equity markets) at all... certainly into next
At 1601 GMT, the FTSEurofirst 300 index of top
European shares was down 0.6 percent at 1,298.95 points. The
index has slipped about 4 percent since late February.
Despite the recent pull-back, strategists remained bullish
on the longer-term outlook for European equities. They said
shares should continue to benefit from investment inflows
supported by expectations of a strengthening global economy.
"European equities ... remain relatively under-owned
globally. We know that there are still flows away from emerging
markets which we think will persist and that money needs to find
a new home. (It is) more likely to go into European and Japanese
equities than U.S. equities," Gerry Fowler, global head of
equity and derivatives strategy at BNP Paribas, said.
"We think there may well be allocations out of U.S. equities
from pension funds who are overweight and they may put that
money into Japanese and European equities."
UK retailers dropped after Wm Morrison cut its
profit outlook, which sent its shares down 11.2 percent. Rivals
Sainsbury's and Tesco lost 8 percent and 4.6
German potash miner K+S sank 8.8 percent after
saying it expects operating earnings to fall for a third
straight year. Prices for the fertiliser ingredient have dropped
following the break-up of an export alliance between two larger
Alongside the concerns over China and Ukraine, investor
worries were focused on corporate earnings and whether profits
will be strong enough to justify lofty valuations after a strong
run-up in share prices.
The STOXX Europe 600 is trading on a 12-month forward
price/earnings ratio of 14 times against its 10-year average of
11.9 times, Thomson Reuters Datastream shows.
"Earnings do need to catch up a bit with valuations," said
Paul Sedgwick, head of investment at Frank Investments. "Maybe
this year will be a case of markets pausing for breath; they
have had a good run."
Sedgwick holds companies with strong balance sheets,
diversified business models and decent dividend policies,
including German agrochemicals and seeds maker BASF,
German engineer Siemens and British consumer goods
group Reckitt Benckiser.
Europe bourses in 2014:
Asset performance in 2014:
Today's European research round-up