European shares fell further on Wednesday after deepening conflict in Libya and growing tensions elsewhere in the oil-rich Arab world pushed crude back near recent highs and fuelled growth fears among buyers of equities. Brent neared 2 1/2-year highs after violence intensified in Libya and a top oil official warned the benchmark could pass $130 a barrel, from its current $117, while concerns over unrest in key producer Saudi Arabia also weighed.
Fears a persistently high oil price could damage economic growth drove a 0.7 percent fall in the FTSEurofirst 300 to 1,153.73 points, as the equity risk premium rose to push investor flows to the sidelines or into safer havens like gold or the Swiss franc. The release of bullish US private sector jobs data, ahead of non-farm payrolls data on Friday, helped temper European stock falls after the US opened stronger, but Mid-East geopolitical concerns remained its focus.
By the European close, US markets were down 0.1 percent to up 0.2 percent. European investor caution could also be seen in the VDAX-NEW volatility index's 1 percent rise to 20.65. The higher the index, which measures sell and buy options on Frankfurt's top-30 stocks, the lower investors' risk appetite. Automakers bore the brunt of the broad selloff, down 1.8 percent and flat on the year after an extremely strong 2010, with BMW and Daimler down more than 2.7 percent on concern over demand at a time of high petrol prices.
Insurers were also lower after leading reinsurer Swiss Re said it faced around $800 million of claims from the recent earthquake in New Zealand and that total industry claims could rise to $12 billion. The rise in oil price had pushed the equity risk premium higher, said a head of sales trading at a European investment bank, prompting some long-only money to stay on the sidelines. Around Europe, Britain's FTSE 100 index ended down 0.4 percent, Germany's DAX index fell 0.6 percent, and France's CAC 40 dropped 0.8 percent.
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