* FTSEurofirst 300 down 1.1 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 hit a five-week
closing low on Thursday as worries over economic growth in China
and tension in Ukraine took their toll on market sentiment.
A broad sell-off among UK retailers, after a profit warning
by supermarket Morrison's, also contributed to the downward
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.
Developments in Ukraine before Sunday's referendum in
Crimea, which some fear could bring harsh Western sanctions
against Russia, also prompted many investors to sell out.
European shares extended losses in late trade after
Ukraine's acting president said that Russian forces were
concentrated on the border "ready to invade", although he
believed international efforts could end Moscow's "aggression"
and avert the risk of war.
IG market analyst Chris Beauchamp said he did not expect to
see much progress in equity markets "certainly into next week."
The FTSEurofirst 300 index of top European shares
closed down 1.1 percent at 1,293.35 points, its lowest close
since February 6. The index has slipped more than 4 percent
since late February.
Nonetheless, strategists remained bullish on the longer-term
outlook for European equities, suggesting 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," said Gerry Fowler, global head of
equity and derivatives strategy at BNP Paribas.
"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 11.9 percent and
prompted worries about an industry price war which would eat
into profits across the board. Rivals Sainsbury's and
Tesco lost 8.5 percent and 5 percent respectively.
German potash miner K+S sank 9.9 percent after
saying it expected 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
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, and some investors
wonder whether profits will be strong enough to justify the
strong run-up in share prices.
"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.
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