EUROPE MARKETS: Europe Stocks Close Near Five-month Low On Iraq, Growth Fears

By Carla Mozee, MarketWatch

Italian index advances

LONDON (MarketWatch) -- European stocks fell Friday, and logged losses of more than 2% for the week in which geopolitical tensions and regional growth concerns took their toll.

The Stoxx Europe 600 dropped 0.6% to 324.91, the lowest close since March 24, FactSet data showed.

European markets followed Asian declines overnight, coming after U.S. President Barack Obama on Thursday authorized targeted airstrikes in northern Iraq targeted against Islamist militants. In Japan, the Nikkei Average sank 3%. The Pentagon said Friday the U.S. military began its airstrikes.

The pan-European index pulled lower by 2.1% this week as investors fled risk, in part as a trade war between Russia and the West escalated over Russia's support of separatist forces in Ukraine. The Stoxx 600 came off intraday lows Friday following a Russian news service report that Russia was looking to de-escalate its conflict with Ukraine.

With investors concerned about the impact of the trade war on Germany, Europe's largest economy, the DAX 30 this week dropped 2.2%, and marked a 10% fall from its all-time high hit on June 20. The DAX closed Friday's session down 0.3% at 9,009.32.

European Central Bank President Mario Draghi on Thursday acknowledged that risks to the region's economic outlook tilt to the downside. His comments came after the central bank decided to hold its key lending rate steady at 0.15%, and maintain its deposit rate at minus 0.10%.

Draghi "needs to be more proactive," said Stephen Pope, managing partner of London-based Spotlight Ideas, on Friday. "Once we get toward October, we need to see ... aggressive [quantitative easing] coming through."

Roundup

But one of Friday's advancers on the DAX and the Stoxx 600 was Allianz SE , up 0.5% after the insurer and Pimco parent reported second-quarter profit that topped expectations on Friday.

Bucking the downward trend in stocks Friday, Russia's MICEX index rose 1.1% to 1,348.21. Italy's FTSE MIB rose 0.3% to 19,193.48, in part after the Italian government late Thursday approved measures aimed at pulling the country out of recession.

Stock in Banca Popolare di Milano leapt 6.9%. Banca Popolare dell'Emilia Romagna surged 11.7% after Italy's stock market regulator banned short selling of the lender's shares, according to Dow Jones Newswires. The stock fell nearly 14% on Thursday after the lender reported loan-loss provisions that were higher than expected.

In Paris, the CAC 40 shed 0.1% to 4,147.81. It closed the week lower by 1.3%.

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