* FTSEurofirst 300 down 1 pct, Euro STOXX 50 down 0.7 pct
* Payrolls increase 209,000 in July, less than expected
* Investors rattled by Argentina's default, Russian
* Banco Espirito Santo stock sinks 19 pct
By Blaise Robinson
PARIS, Aug 1 European shares slightly trimmed
losses on Friday after data showing U.S. job growth slowed more
than expected last month, soothing concerns of an early interest
But stocks remained deep in negative territory, with a broad
index trading at 3-1/2 month lows, hurt by tension between
Russia and the West, Argentina's default, as well as concerns
around losses at Banco Espirito Santo.
The Labor Department said on Friday nonfarm payrolls
increased 209,000 last month after surging by 298,000 in June,
missing economists' expectation of an increase of 233,000 jobs.
"The number was a fairly big miss, but it means the
Americans may hold off a little bit longer from raising rates,"
said Joe Neighbour, trading analyst at London-based firm Central
While encouraging for the global economy at large, the
prospect of strong job numbers had fuelled expectations the Fed
would raise rates soon. The U.S. central bank's ultra-loose
monetary policy has helped drive a two-year rally in equity
markets, with the FTSEurofirst 300 up 45 percent since mid-2012,
before this week's sell-off.
The sharp rally has propelled European stocks to valuation
levels not seen since 2005, with the broad STOXX Europe 600
trading at 13.9 times expected earnings in the next 12
months, according to Thomson Reuters data. This compares with a
price-to-earnings ratio of 15.7 for Wall Street's S&P 500
By 1345 GMT, the FTSEurofirst 300 index of top
European shares was down 1 percent at 1,337.06 points. The index
was down 1.3 percent to a level not seen since mid-April shortly
before the data was released.
The euro zone's blue-chip Euro STOXX 50 index
was down 0.7 percent at 3,093.17 points, while Germany's DAX
was down 1.6 percent.
Technical charts sent a strong negative signal on the DAX,
with the index breaking below its 200-day moving average for the
first time in two years.
Investors have been worrying about the impact of sanctions
against Russia. This week, the European Union and the United
States targeted its energy, banking and defence sectors in the
strongest international action yet over Moscow's support for
rebels in eastern Ukraine.
About 40 European blue-chips, including many German
companies, derive more than 5 percent of their revenues from the
Adding to investors' concerns, data showed on Friday euro
zone manufacturing growth failed to accelerate as expected last
month despite factories barely raising prices, as growing
tensions in Ukraine weighed on sentiment.
Spanish stocks also underperformed again on Friday, with
Madrid's IBEX dropping 1.4 percent, as traders cited
worries over Spanish companies' exposure to Latin America.
Argentina defaulted on Thursday for the second time in 12
years following the collapse of last-ditch talks with holdout
creditors, raising worries over the outlook for Latin America's
No. 3 economy.
In Portugal, shares in Banco Espirito Santo shed 19
percent, adding to its 42-percent drop on Thursday when the bank
posted a 3.6 billion euro loss and higher-than-expected
provisions to cover its exposure to companies owned by its
founding Espirito Santo family.
Shares in France's Credit Agricole, which holds a
significant stake in the bank, have lost nearly 5 percent this
The massive loss at the Portuguese bank has dragged Europe's
banking sector index down 2.1 percent this week,
reviving concerns over the sector, particularly in Southern
Europe, hit hard by the years-long sovereign debt crisis.
Among the top losers on Friday, shares in ArcelorMittal
, the world's largest steelmaker, sank 4.7 percent
after cutting its forecast for earnings this year.
French telecom group Iliad dropped 7.8 percent
after making an offer for T-Mobile US Inc that set up a
potential bidding war with Sprint Corp.
Bucking the trend, Europe's No. 2 insurer AXA,
rose 2.7 percent after reporting a better-than-expected
first-half net profit.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Additional reporting by Sudip Kar-Gupta in London; Editing by