[MILAN] European shares dropped to one-week lows on Tuesday as mounting geopolitical tensions following the downing of a Russian warplane near the Syrian border pushed investors out of risky assets like equities.
Travel stocks were among the hardest hit following a US travel warning, while sentiment was also depressed by disappointing updates from companies such as Zodiac Aerospace .
The pan-European FTSEurofirst 300 index closed down 1.3 per cent after falling by as much as 2 per cent. Last week the index touched a three-month high on ECB monetary stimulus hopes.
"With equity markets markedly off the September lows and expectations of more stimulus from the ECB and of a dovish hike at the Fed baked into current valuations, the downing of the Russian warplane, combined with the high terrorism alert, could be a trigger for profit taking," JCI Capital analyst Emanuele Rigamonti said.
Turkey shot down a Russian warplane near the Syrian border on Tuesday, saying the plane had repeatedly violated its air space. But Russian President Vladimir Putin denied the claim and warned of "serious consequences" for what he termed a "stab in the back". "The risk now is that tensions could mount even further, and sentiment drift lower," Mr Rigamonti said.
Energy stocks staged a mid-afternoon turnaround to end up 0.5 per cent, after crude prices rallied on the Russian plane incident and a weaker dollar.
Zodiac shares fell as much as 13.6 per cent after the aerospace supplier posted a 44.6 per cent drop in core annual earnings following production delays at its troubled aircraft seats division. It ended down 7.7 per cent.
Telecoms group Altice tumbled 9.3 per cent as Next Alt, owner Patrick Drahi's personal holding, said it wanted to exercise a right to sell 7.5 per cent of Altice's shares.
The STOXX Europe 600 Travel and Leisure index, was the top sectoral decliner in Europe.
Its 2.3 per cent fall came after the US State Department issued a global alert for Americans planning to travel following deadly attacks in France and Mali, citing "increased terrorist threats".
"Investors should stay cautious in the near term as the threat of terror attacks are spreading to other parts of the world. The US travel alert further highlights investors'caution. These concerns could have a further negative impact on fresh travel bookings," said Koen De Leus, senior economist at KBC in Brussels.
Travel information firm ForwardKeys said new flight bookings to Paris, one of the world's most visited cities, fell by more than a quarter in the week following attacks there on Nov 13 that killed 130 people.
Shares in budget airline easyJet, British Airways owner IAG, InterContinental Hotels Group, cruise operator Carnival and tour operator TUI were down 1.6 to 3.2 per cent.
On the positive side, Volkswagen rose 5.5 per cent after its CEO said late on Monday that the steps needed to fix about 8.5 million Volkswagen cars in Europe fitted with illegal emissions-control software were technically and financially manageable.
A price target upgrade by UBS to 160 euros from 150 euros also helped.