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European shares pulled down by China worries

Published 01/20/2011, 07:36 AM
Updated 01/20/2011, 07:40 AM

* FTSEurofirst 300 index down 0.8 percent

* Miners down on worries about China tightening

* For up-to-the minute market news, click on

By Joanne Frearson

LONDON, Jan 20 (Reuters) - European shares fell on Thursday after data from China increased worries about further monetary tightening and its impact on growth, with miners and carmakers worst hit.

By 1209 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.8 percent at 1,143.87 points - its lowest since 11th January.

"Market sentiment is down as the Chinese growth figures and inflation data point to rate hikes, I expect the market to sell off throughout the day" Matt Brown, trader at Catalyst Markets said.

Chinese growth soared past forecasts and inflation slowing less than expected, heightening concerns the government will intensify its easy-does-it approach to tightening.

Miners fell on concerns demand for metals could soften if China tightens monetary policy further. Anglo American, Antofagasta, BHP Billiton and Eurasian Natural Resources Corporation slipped 1.6 to 2.8 percent.

Carmakers also featured among the worst performers, with German carmakers hit by worries exports to China would ease.

BMW and Daimler AG's fell 3.5 percent and 2.6 percent respectively, while Italian carmaker Fiat dropped 4.8 percent after JPMorgan cuts its rating to "underweight" from "neutral".

FINANCIALS GAIN

On the upside, banks in the euro zone peripheral region were in demand on optimism over the shape of possible reforms to the euro zone rescue fund.

The Financial Times Deutschland on Thursday said euro area finance ministers had discussed a plan to allow Athens to buy back its own debt using credits from the euro zone's rescue fund at a regular meeting in Brussels on Monday.

Italian banks Intesa Sanpaolo and UniCredit gained 3.4 percent and 1.7 percent respectively, while Spain's Banco Santander was up 1.5 percent.

"People keep on buying Italian and Spanish (financials) where most of the market is underweight," a broker said citing less fears on euro zone sovereign debt and recent news on bond auctions in some countries.

However, traders pointed to some investor caution in the banking sector as they awaited Morgan Stanley results, with the STOXX Europe 600 Banks only up 0.3 percent having dipped in negative territory earlier.

Later in the session, U.S. weekly jobless claims will also be a focus at 1330 GMT.

Across Europe, the FTSE 100 index was down 1.4 percent, Germany's DAX was 0.6 percent lower and France's CAC 40 was down 0.2 percent.

The Peripheral Eurozone Countries Index was 0.8 percent higher. (Reporting by Joanne Frearson; editing by Elaine Hardcastle)

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