Worries over Ukraine, Chinese economy hit European shares
* Euro STOXX 50 falls 1.4 pct, dips below 50-day moving average * Equity strategists cut China rating to "neutral" * M&A could boost markets in May - Clairinvest fund manager * London market closed for public holiday By Sudip Kar-Gupta LONDON, May 5 (Reuters) - European shares fell on Monday as concerns about the spreading conflict in Ukraine and weak Chinese manufacturing data weighed. The euro zone's blue-chip Euro STOXX 50 index was down 1.4 percent at 3,134.17 points, dipping below its 50-day simple moving average level - a sign of more near-term weakness for technical traders. Germany's DAX, which hit a record high of 9,794.05 points in late January, fell 1.3 percent to 9,431.35 points while France's CAC shed 1.1 percent to 4,409.67 points. Trading volumes were thin as the UK stock market was closed for a public holiday. Tensions in Ukraine focused investors' minds after pro-Russian militants stormed a Ukrainian police station in Odessa on Sunday and freed nearly 70 fellow activists. Reuters reported heavy fighting outside the pro-Russian rebel stronghold of Slaviansk in Ukraine on Monday. "The path of least resistance on the stock market appears to be down, especially with the escalation in Ukraine," said Luc Bocahut, portfolio manager at Monaco-based Tiverton Trading. The Euro STOXX 50 has risen some 2 percent from lows of around 3,080 points in mid-April, and Bocahut said events in Ukraine were driving investors to sell after that rally. "We've had a good run-up, so people are going to be quick to take profits," he said. WEAK CHINESE DATA The weak Chinese data also hit appetite for equities. The final reading of China's HSBC/Markit purchasing managers index (PMI) for April came in at 48.1, lower than a preliminary reading of 48.3. Output and new orders contracted and new export orders slipped back into contraction. UBS' equity strategists cut their rating on China to "neutral", with the Swiss bank adding in a research note that there was a risk that Chinese economic growth could slow to around 5 percent next year from just over 7 percent at present. The Euro STOXX 50 index remains up by around 2 percent since the start of 2014. Germany's DAX is down 1.2 percent but France's CAC has risen nearly 3 percent, helped by signs of corporate takeover activity such as bid interest for French manufacturing group Alstom. Clairinvest fund manager Ion-Marc Valahu said he still had "long" positions to bet on gains in the Euro STOXX and CAC since he expected the recent resurgence of merger and acquisition activity to help those markets. "I think there's a bit more value on the CAC due to the M&A, and I think we could reach 3,250 points on the Euro STOXX by the end of May," he said. Europe bourses in 2014: link.reuters.com/pap87v Asset performance in 2014: link.reuters.com/gap87v Today's European research round-up (Additional reporting by Blaise Robinson; Editing by Hugh Lawson, John Stonestreet)
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