* FTSEurofirst 300 down 0.4 percent after 5-week lows
* Moody's downgrade of Spain hurts market sentiment
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, March 10 (Reuters) - European shares hit a five-week
low on Thursday as worries about the health of peripheral euro
zone economies grew after Moody's downgraded Spain's rating,
while miners were hit hard on surprisingly weak Chinese data.
Investor appetite for risky assets such as equities fell,
with the VDAX-NEW volatility index <.V1XI> touching a
three-month high before paring gains. The higher the index,
which is based on sell and buy options on Frankfurt's top-30
stocks <0#.GDAXI>, the lower the market's desire to take risk.
At 0946 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.4 percent at 1,139.98 points after
touching 1,133.55 -- the lowest since late January.
Spain's benchmark stock index IBEX <>, down 0.9
percent, underperformed the wider market. Italy's FTSE MIB
<.FTMIB> was down 0.7 percent, Ireland's ISEQ <.ISEQ> fell 0.3
percent and the Thomson Reuters Peripheral Eurozone Countries
Index <.TRXFLDPIPU> dropped 1.2 percent.
"The troubles in the peripheral economies have resurfaced
and it's certainly going to hurt sentiment. If they are forced
to come up with more austerity measures, that will hurt their
economies further," said Philippe Gijsels, head of research at
BNP Paribas Fortis Global Markets in Brussels.
Moody's cut Spain's sovereign credit rating by a notch and
warned of further cuts, saying the country's plans to clean up
the battered banking sector will cost more than the government
expects and will add to its debt burden. []
Banks were on the back foot, with the European sector index
<.SX7P> falling 0.7 percent. Allied Irish Banks <ALBK.I> was
down 6 percent, while Spanish banks Banco Santander <SAN.MC> and
BBVA <BBVA.MC> fell 1.8 percent and 1.4 percent respectively.
"When these things actually happen, then it has some further
negative effect but the bulk of the negative impact is
understood and priced in," said Richard Greenwood, fund manager
at Bedlam Asset Management, referring to Spain's downgrade.
The cost of insuring Spanish debt against default rose on
Thursday, while data showed German exports unexpectedly fell 1
percent in January. []
MINERS SLIP
Miners were among the top decliners as weak Chinese import
data cast doubt on demand for raw materials. Figures showed
China swung to a surprise trade deficit in February of $7.3
billion, its largest in seven years. []
The STOXX Europe 600 Basic Materials index <.SXPP> fell 2
percent, while BHP Billiton <BLT.L> dropped 2.7 percent.
However, Greenwood of Bedlam, which manages $700 million,
said the market presented opportunities for stock pickers as
equities offered valuation opportunities.
"There is no reason to believe that equities are overvalued,
whereas some other asset classes like sovereign debt markets
look hideously overvalued."
Europe's STOXX 600 index <> currently trades at 10.8
times expected earnings, below a 10-year average of 13.6,
according to Thomson Reuters Datastream. This compares with a
price-to-earnings ratio of 13.1 for U.S. S&P 500 index <.SPX>.
Greenwood said the market was witnessing a rotation into
developed markets from emerging markets.
"A lot of developed market stocks have big emerging market
businesses, which we are picking up at better valuations at the
moment. Oil as a long-term structural investment idea has a lot
of merit, but you have got to get it at the right price and we
may have missed that at the moment."
Delhaize <DELB.BR> rose more than 4 percent to an
eight-month high after the Belgian supermarket group beat market
expectations for profit in the fourth quarter. []
Investors will keep an eye on the Bank of England's interest
rate decision, with analysts expecting rates to stay at a record
low of 0.5 percent.
(Editing by Hans Peters)
