* FTSEurofirst 300 down 0.3 pct, Euro STOXX 50 up 0.07 pct
* Bullish 'flag' pattern shaping up on Euro STOXX 50
* Swatch CEO comments trigger selloff in luxury stocks
* Nokia jumps as brisk Lumina sales spark short covering
* Time to buy 'cheap' volatility -Global Equities' Thebault
By Blaise Robinson
PARIS, Jan 10 European shares fell on Thursday,
with a pan-European index slipping from a near two-year high hit
earlier in the day, as comments from Swatch's CEO on
the outlook for Swiss watch exports hurt luxury shares.
A number of traders also mentioned market talk of a
significant move in the derivatives market as the reason behind
the late-session selloff.
The FTSEurofirst 300 index of top European shares
closed 0.3 percent lower at 1,164.65 points, after rising to as
high as 1,170.29 points earlier in the session, a level not seen
since March 2011.
Swatch CEO Nick Hayek said he expected Swiss watch exports as
a whole to grow 5-7 percent in 2013, down from the 12.6 percent
growth recorded for the 11 months up to November 2012.
Shares in LVMH, the world's biggest maker of luxury
goods, lost 1.1 percent, Hermes fell 1.8 percent,
Richemont dropped 2.1 percent and Swatch fell 0.8
"These are the stocks that have shown resilience during the
euro zone debt crisis, and people are now keen to book profits
on these and switch to recent losers that offer more upside," a
Paris-based trader said.
The euro zone's blue chip Euro STOXX 50 index
inched up, closing 0.07 percent higher at 2,708.27 points, but
failed to close above a major resistance level at 2,709, which
represents the starting point of a 30 percent nosedive in
The benchmark's chart shows a bullish 'flag' pattern shaping
up over the past week, and a clear break above the flag, or
above 2,709, could send the index rallying sharply.
SOUTHERN EUROPE RALLY
Around Europe, UK's FTSE 100 index gained 0.05
percent, Germany's DAX index lost 0.2 percent and
France's CAC 40 dropped 0.4 percent.
Southern European markets bucked the trend, extending their
new-year rally, with Spain's IBEX up 0.2 percent,
Italy's FTSE MIB up 0.7 percent and Portugal's PSI20
up 1.3 percent.
The Euro STOXX 50 has surged 12 percent since mid-November,
outperforming U.S. stock indexes, as abating worries over the
outlook for the euro zone prompted investors to increase their
exposure to European stocks.
"Finally, the vast majority of fund managers now agree that
it's time to switch back to equities, in terms asset allocation,
play the cyclicals and the industrials," said David Thebault,
head of quantitative sales trading, at Global Equities.
"In that sense, there's a serious risk of correction in the
fixed income market. But even with sentiment improving, we
should expect a bumpy road for stocks in the next six months. As
a protection, I'm buying volatility, which is extremely cheap at
The Euro STOXX 50 Volatility Index, or VSTOXX,
Europe's widely used measure of stock market risk aversion, has
tumbled nearly 60 percent since early June.
The VSTOXX - which is used to measure the cost of protecting
stock holdings against corrections - hit a 5-year low of 14.9
last month, with a number of market players seeing the sharp
drop as a sign of rising investor complacency.
Nokia jumped 11 percent on Thursday after
unveiling strong sales of Lumia smartphones, sparking a short
covering rally. The struggling cellphone maker has 17 percent of
its shares out on loan, according to Markit data, making it one
of the most 'shorted' stocks in Europe.