European shares hit 5-month low on Greece jitters

European shares hit a fresh five-month low on Monday after losing more than 5 percent last week as investors remained jittery about the ability of Greece and Spain to deal with their debt problems and due to concerns about the banking sector.

At 0812 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 965.86 points after falling to a low of 964.66, the lowest since December. The index fell more than 5 percent last week.

“The fact remains that there is still a question mark over Greece and there are ongoing concerns about a slowdown in China. There is a great deal of cash on the sidelines, waiting to be invested. But with the uncertainty, that money is likely to stay on the sidelines,» Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said.

“Investors are looking to identify stable, strong cash-generative companies which do have geographical diversification. It’s a kind of bottom-up approach rather than a top-down approach,» he said, adding that companies such as Vodafone could be a good investment choice.

Vodafone shares were up 0.5 percent.

The market ignored a statement by the Group of Eight economies on Saturday that their imperative was to promote growth and jobs. They also recognized problems among European banks and gave verbal backing for Greece to stay in the euro.

Investors are concerned about the risk of a chaotic Greek exit from the euro, which would hit the region’s banking system and possibly the global economy.

European travel and leisure shares, down 1.2 percent, were the top decliners, with Ryanair falling more than 5 percent after warning that surging fuel costs and a worsening economic outlook meant profit would slip by up to 20 percent in the coming year. [Reuters]