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Europe's shares hit by Ukraine crisis

Monday, July 21 16:54:43

European shares fell today as fighting erupted in eastern Ukraine, while sales data from French carmaker Peugeot raised concern about demand from emerging markets.

A reported assault by Ukrainian tanks on rebel-held Donetsk - the first major eruption of violence there since a Malaysian airliner was shot down last week - undercut investor sentiment.

The five-month conflict in Ukraine has added to concerns for European exporters already struggling with unfavorable currency fluctuations.

Peugeot's shares fell 3.8 percent after it said deliveries fell 25.8 percent in Russia, 26.8 percent in Latin America and 37.2 percent in Africa and the Middle East.

Shares in Fiat and Renault each shed over 1 percent despite encouraging sales figures from Europe's peripheral markets, leaving the STOXX 600 auto and parts index down 1.1 percent.

Investors were positioning for some weak emerging-market figures when auto makers report quarterly figures over the next few weeks.

"There are so many weak spots in the global (auto) markets, and the deterioration in Russia has contributed to the negative sentiment," said Juergen Pieper, an auto analyst at Metzler Equities. "It's demand and (emerging) currency (weakness) ... The effect is not so small ... (The auto sector) needs quite a convincing quarter to change the trend."

Elsewhere, Israel showing no signs of scaling back its assault on Gaza, and the potential impact on tourism of instability in parts of eastern Europe and the Middle East hit the travel and leisure sector, which fell 1 percent.

Calls are multiplying in the West for new sanctions against Moscow over last week's downing of the Malaysia Airlines flight over eastern Ukraine, widely blamed on pro-Russian separatists. Russia challenged the accusations on Monday.

"The proximity to the Ukraine crisis does cause European investors to be a bit more circumspect over the issues there, while Wall Street is more distant and seems to be able to push on regardless," Jeremy Batstone-Carr, analyst at Charles Stanley, said.

Batstone-Carr said that concerns over retaliatory moves by Russia, included the possibility that they might switch off gas taps to Europe, made European investors especially nervous.

While euro zone blue-chip companies get only 0.3 percent of their revenues from eastern Europe, Russia is a key provider of energy to many western European countries, notably Germany and Italy.

The pan-European FTSEurofirst 300 was down 0.5 percent at 1,355.64 points by 1428 GMT. The euro zone Euro STOXX 50 fell 0.8 percent to 3,137.61 points. (Reuters)

For more visit: www.businessworld.ie