GDF Suez headquarters is seen in Paris. France’s CAC underperformed yesterday with a 1.3% decline, hit by a 2.3% drop in French utility firm.

Reuters/London

European shares fell yesterday, with utility GDF Suez a standout loser, as traders cited fears that violence in Iraq will escalate further as a cue for investors to cash in on last month’s equity rally.

The pan-European FTSEurofirst 300 index ended down by 1.1% at 1,372.04 points, marking its lowest level in around three weeks.

France’s CAC underperformed with a 1.3% decline, hit by a 2.3% drop in utility GDF Suez after the French state sold a 3.1% stake at €20.18 per share, the bottom of a range set by bookrunners.

Traders said the conflict in Iraq was providing investors with a reason to cash in on last month’s rally, which saw Germany’s DAX hit a record of 10,050.98 points while the FTSEurofirst rose to a 6-1/2 year high of 1,399.62 points.

“We’re coming in for some healthy gains, and the tendency is to cash in those gains,” said Mirabaud Securities equity sales executive Rupert Baker.

Although the price of oil edged down, traders said events in Iraq remained worrying enough to justify trimming equity positions in case the situation deteriorated.

Militants attacked one of Iraq’s largest air bases and seized control of several small oilfields yesterday as US military experts arrived to set up an operations centre to help Iraqi security forces counter a mounting Sunni insurgency.

“Investors are still concerned about American foreign policy and what will be the next step in terms of any military intervention as opposed to diplomacy in the Middle East region,” said B Capital managing director Lorne Baring.

Mike Turner, European equity options broker at XBZ Ltd, said the longer-term trend for European stock markets remained positive, with markets supported by economic stimulus measures from the European Central Bank
(ECB).

However, he added that concerns over Iraq would peg back those markets in the near-term.

“We’re still in reasonable shape, but we were looking a bit toppy on the upside, and there are one or two jitters around.”