European shares hit lowest close since January

                                
   * FTSEurofirst 300 closes 0.6 pct lower 
                                
 * Rallying crude prices stoke inflation, growth fears
                                
 * Allianz falls on disappointing dividend
                                
 
                                
 By Brian Gorman
                                
 LONDON, Feb 24 (Reuters) - European shares closed lower on
Thursday, on course for their biggest weekly fall in nearly
eight months, as unrest in Libya crisis sent crude prices still
higher, sparking worries about inflation and economic growth.
                                
 The FTSEurofirst 300 <.FTEU3> index of top shares fell 0.6
percent to 1,145.61 points, the lowest close since Jan. 31. The
index is down 3.5 percent so far this week, though it is still
up more than 77 percent from its lifetime low of March, 2009.
                                
 Brent crude futures <LCOc1> surged to their highest since
August 2008 on supply concerns arising from the crisis in
oil-rich Libya, stoking fears higher raw materials costs will
further erode company margins at a time of rising inflation.
                                
 Crude prices were also bolstered by data showing that U.S.
inventories rose less than expected last week.
                                
 Major oil users were among the biggest fallers. German
airline Lufthansa <LHAG.DE> fell 2.7 percent, and International
Consolidated Airlines Group <ICAG.L> shed 3.5 percent to its
lowest close since it was formed last month from the merger of
British Airways and Iberia.
                                
 But some investors say the rally will soon resume. 
                                
 "You can't see a quick resolution to what's going on, but I
see the market's fall as an over-reaction," said Caroline
Vincent, fund manager at Cavendish Asset Management. "There are
worries about oil prices and inflation, but Saudi Arabia has
said it will meet the oil shortfall."
                                
 The energy sector recovered some lost ground as investors'
concern about restricted output in the Middle East was offset by
the benefit of higher crude prices.
                                
 Total <TOTF.PA>, ENI <ENI.MI>, BP <BP.L> and Repsol <REP.MC>
rose between 0.9 and 1.6 percent.
                                
 Unrest in the world's 12th-biggest exporter has cut at least
400,000 barrels per day (bpd) from Libya's 1.6 million bpd
output, according to Reuters calculations. ENI Chief Executive
Paolo Scaroni said Libyan output had fallen much more
dramatically, estimating it was putting 1.2 million barrels per
day less into the market. [ID:nRMENDE7GE] 
                                
 Across Europe, Britain's FTSE 100 <.FTSE> and France's CAC40
<.FCHI> both fell 0.1 percent; Germany's DAX <.GDAXI> fell 0.9
percent.
                                
 
                                
 PORSCHE TUMBLES
                                
 Porsche <PSHG_p.DE> fell 10.7 percent after the carmaker
said a planned merger with Volkswagen <VOWG_p.DE> would be
delayed by a widening investigation into former board members.
[ID:nLDE71N0NA]
                                
 Higher oil prices also continued to weigh on the auto sector
<.SXAP>. Renault <RENA.PA> and BMW <BMWG.DE> were down 2.7 and
2.2 percent, respectively.
                                
 A bumper equity issue from Aegon <AEGN.AS> and a
disappointing dividend from Allianz <ALVG.DE> stirred fresh
fears about European insurers' capital strength. The two fell 1
and 2.7 percent.
                                
 In the banking sector, Royal Bank of Scotland <RBS.L> fell
3.6 percent after high bad debt charges in Ireland and a drop in
investment banking income overshadowed the bank's return to
profit in the final months of 2010. [ID:nLDE71M0VH]
                                
 French bank Credit Agricole <CAGR.PA> rose 5.2 percent after
it dismissed fears it would have to raise new capital to meet
tougher Basel III banking rules. [ID:nLDE71N03X]
                                
 Germany's RWE <RWEG.DE>, Europe's fifth-largest utility,
fell 5.2 percent after saying it would cut investments and sell
assets to counter a worsening profit outlook. [ID:nLDE71M265]
                                
 Muammar Gaddafi was clinging to power on Thursday as rebels
seized important towns in the west of Libya. [ID:nLDE71N009]
                                
 "The problem with civil unrest is that we don't really know
when it's going to end. It might get worse and the supply of oil
might come down even more, and that's a big concern for the
market," said Sebastian Lynar, sales trader at IG Index.
                                
 Euro zone economic sentiment jumped in February to its
highest level since the economic crisis, but a surge in
inflation expectations accompanied prospects of a rebound of
growth in the first quarter. [ID:nLDE71N15Q]
                                
 U.S. economic data was mixed. Claims for jobless aid fell
last week, hinting at an improvement in the labour market, but
declines in new home sales and orders for a range of factory
goods in January showed the economy still faced headwinds.
[ID:nLDE71N21X]
 (Additional reporting by Harpreet Bhal; Editing by Will
Waterman)