LONDON/MILAN, Dec 11 European shares fell on Friday on concerns that weakness in the Chinese yuan could weigh on the global economy, while the slump in oil prices added to the gloomy mood before a widely expected rise in U.S. interest rates next week.
The pan-European FTSEurofirst 300 index fell 2 percent to its lowest level in around two months, and was on course for its weakest weekly perfomance since August. The euro zone's blue-chip Euro STOXX 50 index declined by a similar amount.
"We have the yuan at 4-1/2 year lows and that is causing unease in China and abroad. Last time the yuan fell like this, it caused a jolt for markets, and anyone exporting out to China, like the auto makers and luxury brands, will feel the pain from a weaker yuan," Jasper Lawler, market analyst at CMC, said.
That could hurt export-oriented companies in sectors such as automotive, luxury goods and commodities, which were among the top decliners in Europe.
Shares of French carmaker Renault, watchmaker Swatch, fashion house Hugo Boss and BHP Billiton were all down 3.3 to 5.8 percent.
The FTSEurofirst is down by 4 percent so far this week and also down 7.8 percent since the start of December, after the European Central Bank disappointed some investors with only limited new economic stimulus measures this month.
"Markets continue to discount disappointment over the ECB. You add oil prices making new lows, worries over U.S. high yield, China deflation and a mini credit crisis in Italy, then you have the cocktail that is weighing on markets," said Giuseppe Sersale, fund manager at Anthilia in Milan.
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