LONDON Feb 6 Euro zone equities sank to two-month lows on Wednesday, with investors locking in profits on a half-year rally, spooked by a run of weak corporate earnings and signs of growing political tensions in the euro zone.
France and Germany showed signs of disagreement over the euro exchange rate, whose recent strength threatens corporate profits and a nascent economic recovery in the region.
France said it would raise concerns about the euro at a finance ministers' meeting next Monday, but expectations of any action cooled after the spokesman for German Chancellor Angela Merkel said the currency is not overvalued.
The apparent disagreement further fuelled concerns about stability in the euro zone, adding to uncertainty over the outcome of upcoming Italian elections and a corruption scandal in Spain and prompting some investors to bank gains on a 25 percent rally in euro zone blue chips since June.
"It's probably quite a good time to take profits," said Robert Quinn, chief European equity strategist at S&P Capital IQ. "We're looking at a period of consolidation in the short term and most of the visible risks seem to be at the beginning of the year."
The EuroSTOXX 50 gauge of euro zone blue chips provisionally closed down 1.1 percent at 2,621.59 points, its weakest finish since early December and further retreating from 1-1/2 year peaks of 2,754.80 points set last week.
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