European shares hit 3-month low on Japan disaster

                                
 * FTSEurofirst 300 down 1.2 pct to three-month closing low
                                
 * Utilities, insurers among top fallers on Japan disaster
                                
 * Greek banks surge following improved bailout terms 
                                
 
                                
 By Atul Prakash
                                
 LONDON, March 14 (Reuters) - European shares hit a
three-month closing low on Monday on worries about the economic
impact of Japan's earthquake on growth and demand, though some
analysts said equities had the potential to recover soon.
                                
 Roads and rail, power and ports have been crippled in Japan
and it scrambled to avert a meltdown at a nuclear plant after an
explosion at one reactor, with the cost of the disasters
estimated at about $170 billion. Japanese stocks slipped on
Monday, wiping $287 billion off market capitalisation.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
finished 1.2 percent down at 1,109.38 points, the lowest close
since early December. The index has fallen 7 percent since
hitting a 29-month high about one month ago.
                                
 Don Fitzgerald, fund manager of European equities at
Tocqueville Finance that manages $2.2 billion, said the market
was witnessing a lot of sector rotation as short-term traders
tried to make money from the tragic events in Japan.
                                
 "(The disaster is) another slight negative for 2011 economic
growth. The reinsurance sector is under pressure as the quake
could well wipe out a big portion of the sectors' earnings this
year," Fitzgerald said."
                                
 "Anything related to the nuclear sector is under pressure as
traders bet on tougher regulation. At the same time the
renewable sector is in favour as the other side of the trade."
                                
 Utilities fell the most, with the sector index <.SX6P> down
2.1 percent. E.ON <EONGn.DE>, which gets 41 percent of its
19,000 megawatts of German power generation capacity from
nuclear, fell 5.3 percent as Germany cast doubts about the
future of its nuclear industry and Switzerland put on hold some
approvals for nuclear plants.
                                
 However, shares in renewable energy companies were in demand
after Japan's problems. SolarWorld <SWVG.DE> rose 13 percent and
Nordex <NDXG.DE> gained 17.8 percent, with volumes touching 634
percent and 600 percent of their 90-day daily average.
                                
 
                                
 RISK APPETITE FALLS
                                
 Investor appetite for risky assets such as equities fell,
with the VDAX-NEW volatility index <.V1XI> rising 8 percent to
its highest in more than three months. 
                                
 Some market experts said European equities' limited decline
following the disaster indicated that stocks had the potential
to bounce back soon. Valuations were not extremely low but still
more attractive than in the U.S. market, they said.
                                
 Europe's STOXX 600 index <.STOXX> currently trades at 10.8
times one-year forecast earnings, below a 10-year average of
13.6, according to Thomson Reuters Datastream, and against a
ratio of 13.1 for the U.S. S&P 500 <.SPX>.
                                
 "Despite the Japanese market falling back quite sharply
overnight European markets have today been somewhat more
restrained. We do not believe that the events in Japan this past
week provide a case for overall caution on equities," said
Howard Wheeldon, senior strategist at BGC Partners.
                                
 "The resourceful Japanese will find new solutions to
whatever problems they face very quickly and within weeks
Japan's industry will be all but up and running again."
                                
 In Europe, the STOXX Europe 600 Insurance index <.SXIP> fell
2.1 percent, while reinsurers Munich Re <MUVGn.DE> and Swiss Re
<RUKN.VX> fell 3.4 percent and 4.5 percent respectively on
estimates the quake could cost the industry nearly $35 billion.
                                
 
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  For a Factbox on major insurance losses, click on
                                
                                               [nLDE72C0AB]
                                
  Graphics on Japan quake, aftermath, and economic context 
                                
                                http://r.reuters.com/fyh58r
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Banks, however, gained as European policymakers surprised at
the weekend by agreeing to bolster a bailout fund for the
troubled eurozone countries. [ID:nLDE72D2A5]
                                
 Greek banks <.FTATBNK> jumped 8.7 percent as investors
welcomed the improved bailout terms for Greece, while the
Thomson Reuters Peripheral Eurozone Banks index
<.TRXFLDPIPUBANK> was up 3.8 percent. ID:nLDE72C0EN]
                                
 "What's happened in Japan is awful, but for us closer to
home the bigger issue now is what's happening in Europe," a head
of institutional trading at a London-based investment bank said.
                                
 "Any dip is a buying opportunity."
 (Additional reporting by Josie Cox in Frankfurt; Editing by
Greg Mahlich)