Weak insurance and leisure companies dragged European shares lower on Monday as investors feared large damage payouts and a loss of holiday bookings after Asia's tsunami disaster which killed more than 22,000 people. The euro's climb to a new lifetime high against the dollar above $1.36 also hit sentiment by late session, particularly relating to exporters such as autos and chemicals whose goods are rendered less competitive in the key US market.
This largely overshadowed a near five percent slide in US crude oil prices which will help cut fuel costs for many companies.
Weakness on Wall Street, especially in technology, spilled over into Europe, leaving the group down two percent for the year and the region's worst performing sector.
Dealings were light as London, Europe's biggest equity market, was shut for a public holiday.
The FTSEurofirst 300 index ended off 0.14 percent at 1,040.78 points, though still within striking distance of its 29-month high of 1,044.02 points from earlier in the month.
In the final trading week of 2004, the pan-European blue chip index is up 8.7 percent, its second year of advance in a row after a bruising three-year bear market.
The DJ Euro Stoxx 50 index, which tracks the euro zone's top 50 firms, closed off 0.23 percent at 2,944.16 points.
Utilities were also among the top decliners, the sector down 0.2 percent as investors took profits after the group's near 25 percent rise so far this year.
Asia's quake and tsunami provided the day's focus, triggering early selling in insurance and travel firms as investors played safe while they worked out the likely impact of the events on corporate Europe.
"What happened is a tragedy, but it's in a place where there is not too much industry and financial impact," said Udo Becker, a dealer at Munich private bank Merck Finck.
"I see the damage for insurance companies and travel agencies limited. I think nobody will book the Maldives or Thailand ... but if you want to go for a holiday, you will book somewhere else," Becker said.
Insurers such as Germany's Munich Re and Switzerland's Zurich Financial said it was too early to assess the cost of Sunday's disaster which caused havoc on shores from India to Thailand.
Shares in Munich Re and Swiss Re, the world's top two reinsurers, were down 1.6 and 1.8 percent, respectively.
"There will be damages, even though for reinsurers they will not be that considerable - first, because not very much is insured in these regions, and then a lot is covered by local (companies)," said Stefan Schuermann, analyst at Helvea.
Germany's Hannover Re said it was sticking to its 2004 earnings forecast, and the stock's 0.14 percent fall was less than the insurance sector's 0.5 percent drop.
Europe's largest tourism firm TUI AG fell one percent, while German airline Lufthansa, which along with KarstadtQuelle operates travel firm Thomas Cook, was off 0.6 percent.
TUI said that it foresaw no significant impact on sales and earnings from the tsunami, adding that only 1 percent of its tourism revenue was generated in the region hit by the disaster.
French holiday village operator Club Mediterranee, whose stock dropped 1.4 percent, said its insurance would cover any losses from the disaster which hit its two resorts in the Maldives and one in Thailand.
EURONEXT PRESSURED: Shares in Euronext dropped 0.6 percent after the pan-European bourse declined to comment on a report in the UK's Sunday Times newspaper that it was preparing to raise 1.4 billion pounds ($2.7 billion) in the debt market to fund a bid for the London Stock Exchange.
LSE has received a 1.3 billion pound proposal from Germany's Deutsche Boerse which the UK exchange rejected. Deutsche Boerse shares ended flat.
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