Emerging market turmoil looms over European stocks

By Amanda Cooper and Blaise Robinson - Analysis

LONDON/PARIS (Reuters) - European mining stocks have been the worst hit by financial meltdown in major emerging markets but no sector is immune from the effects of a slowdown in China and India, with even so-called defensive shares set to feel the pinch.

October has been the worst month on record for European equities as the tentacles of the financial crisis grip the globe, slashing stock values, as the regional economy verges on recession. And now emerging markets have entered panic mode.

Analysts at Oddo Securities in Paris have pinpointed those European companies with more than 20 percent of estimated 2008 EBIT generated in emerging countries and are therefore particularly vulnerable.

Some of Europe's major large caps from a wide and indiscriminate range of sectors are right at the top, including Spanish airline Iberia (IBLA.MC), French oil major Total (TOTF.PA), Finnish mobile phone maker Nokia (NOK1V.HE) and drinks group Pernod-Ricard (PERP.PA).

Even as governments and central banks around the world pledge billions of dollars to shore up financial systems and bail out their banks, investors are pulling cash out of regions and asset classes with any element of risk attached.

"This is the last domino falling over, to a lot of people's chagrin who had previous thought (emerging markets) would be insulated from the effect," said Justin Urquhart Stewart, a director at Seven Investment Management.

FALLEN ANGELS

Once the darlings of the stock market, mining stocks largely weathered the rout that hit equities in mid-2007 and proved to be 2008's top performers until just a few weeks ago.