* Euro skids across the board, ECB action fuels fund flows
* Appetite for European shares dented by profit warnings
* Oil climbs on worries over Iraq
By Blaise Robinson
PARIS, June 11 Stocks retreated from recent
highs on Wednesday as profit warnings dented investors'
enthusiasm for equities while the euro fell towards a four-month
low in the wake of upbeat U.S. economic data and the European
Central Bank's monetary easing.
Brent futures climbed above $110 a barrel as
violence in Iraq prompted worries about the outlook for supply,
while a fall in U.S. stockpiles of gasoline pointed to stronger
Traders were watching the unfolding crisis in Iraq, where an
al Qaeda splinter group seized control of the city of Mosul.
"It warrants support of the oil price. We already have Libya
out, Iran's exports are low, and there is no prospect of an
immediate return for either of them," said Bjarne Schieldrop,
analyst at SEB in Oslo.
Profit warnings from Germany's Lufthansa and
France's Vallourec dented investors' appetite for
stocks following a sharp rally, with Germany's DAX
falling 0.9 percent and the pan-European FTSEurofirst 300
index losing 0.4 percent.
But that was balanced in investors' eyes by the strong U.S.
May jobs report released last week, which provided the latest
confirmation of improving economic conditions after severe
winter weather saw the U.S. economy contract in the first
"There are still question marks on corporate results, as
well as on global growth and geopolitical tensions," said Romain
Boscher, global head of equities at Amundi, which has 797
billion euros ($1.08 trillion) in assets under management.
"But we keep a positive bias on stocks. The recent slowdown
in U.S. growth was mostly due to bad weather and the ECB should
be able to thwart deflation."
The euro hovered near a four-month low versus the dollar,
down 0.12 percent at $1.3532, with the single currency
under pressure due to a widening yield gap between euro zone
bonds and their major peers.
A rise in U.S. yields on speculation that the U.S. Federal
Reserve could raise interest rates sooner than previously
expected has supported the dollar and put pressure on the euro
Investors looked to borrow euros at super-low rates and buy
higher-yielding assets abroad, the so-called carry trade.
"The chase for yield looks like it has further to run," said
Shane Oliver, head of investment strategy at AMP Capital.
Sterling nudged up to a new 18-month high against the euro
after a labour report that carried substantial positives for the
British economy but did not necessarily encourage an early rise
in interest rates.
Asian stocks dipped from recent peaks, while Japan's Nikkei
bucked the trend, gaining 0.5 percent after MSCI's
decision to remove South Korea and Taiwan indexes from its
review list for reclassification to developed markets, keeping
them in the emerging markets classification.
There had been speculation Tokyo equities would take the
brunt of rebalancing if Korean and Taiwanese shares were
reclassified to developed markets.
German Bund futures were down 0.08 percent, at
144.91, while gold added $1.52, to $1,262.01 an ounce,
off a four-month low of $1,240.61 hit last week, while zinc in
London and Shanghai hit the highest in around 15 months as
improving demand met tight supply, and copper premiums fell
further in China as traders faced tougher financing conditions
in the wake of a fraud investigation.
(Additional reporting by Simon Falush in London, Wayne Cole in
Sydney and Raoul Sachs in Paris; Editing by Alison Williams)