August 12, 2014 / 3:00 PM / 3 years ago

German shares underperform in Europe as Ukraine conflict hurts economy

* Germany's DAX down 1.1 pct, FTSEurofirst 300 down 0.2 pct
    * ZEW index, Henkel's guidance show Germany hit by Ukraine
    * Danish jeweller Pandora rallies after results

    By Francesco Canepa
    LONDON, Aug 12 (Reuters) - German shares lagged European
peers on Tuesday as weak sentiment data and a gloomy outlook
from consumer goods group Henkel provided more evidence the
region's largest economy is being hurt by the conflict in
    Frankfurt's DAX index fell 1.1 percent, the biggest
decline among major regional bourses, after the ZEW survey
showed German analyst and investor morale fell to its lowest in
more than a year in August.
    The survey reflected the turmoil in Ukraine and concern that
sanctions and counter-sanctions between Russia and the West may
affect Europe's industrial powerhouse. German companies exposed
to Russia range from Adidas, the world's
second-largest sportswear firm, to airport operator Fraport
 and defence firm Rheinmetall.
    Henkel warned that earnings growth would slow in
the second half of the year, partly because of the friction
between Russia and Ukraine. Its shares fell 5
    A Russian convoy carrying food, water and other aid set off
on Tuesday for eastern Ukraine, where government forces are
closing in on pro-Russian rebels, but Kiev said it would not
allow the vehicles to cross onto its territory. 
    At 1455 GMT, the FTSEurofirst 300 index of top
European shares was down 0.2 percent at 1,320.51 points, after
hovering around the gain line for most of the day.
    "Now you have the Ukrainians not letting the aid convoy in
and that shows (the situation) is very far from being solved,"
Markus Huber, a senior sales trader at Peregrine & Black, said. 
    "It seems that the market hasn't made its mind up at the
moment and I haven't seen a clear signal yet that we're turning
    The FTSEurofirst is down 6 percent from its July peak, hit
by worries about conflicts from Ukraine to the Middle East, the
prospect of tighter U.S. monetary policy and softer European
economic data.
    "We've already seen the underperformance, so if there is no
new (negative) development and the economy starts doing not so
badly we may have seen the trough for this correction," said
Joost Van Leenders, an investment specialist for allocation and
strategy at BNP Paribas Investment Partners.
    Danish jewellery maker and retailer Pandora was
a sharp outperformer, rising 8.3 percent after it posted
better-than-expected second-quarter results, leading it to raise
its 2014 revenue forecast. 
    As Europe's earnings season draws to a close, STOXX Europe
600 companies have posted a 9.7 percent rise in
second-quarter profits on average. But revenues have slipped 1.1
percent, reflecting Europe's frustratingly slow economic
    Europe bourses in 2014:
    Asset performance in 2014:
    Today's European research round-up 

 (Additional reporting by Blaise Robinson in Paris; Editing by
Mark Trevelyan)

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