European shares fall amid global risk-off mood on US growth fears

By Pranav Kashyap

(Reuters) -European shares fell more than 1% on Friday, tracking a global risk-off sentiment following disappointing U.S. growth data and overshadowing a handful of positive corporate updates.

The pan-European STOXX 600 index fell 1.4% after touching a three-month low earlier in the session. It is also set to log a 1.5% decline this week.

Most European sub-indexes were in the red, with the technology sector falling 3.6% to a six-month low. The financial sector lost 3.2%. Lower rates could weigh on interest margins, a key source of income for lenders.

A handful of defensive stocks, such as heavyweights Unilever and AstraZeneca, gained on the day, keeping losses in check.

"Market moves can get exacerbated during summer weeks when you get thinner liquidity and trading, especially in August and that can add to the magnitude of moves," Karim Chedid, Blackrock's chief investment strategist for iShares EMEA, said.

A global wave of risk aversion that began overnight in the U.S. swept across Asia and seeped into Europe, sending the STOXX 600 to its worst day in over three months.

The sell-off was ignited by a dismal reading in U.S. manufacturing activity on Thursday, which plunged to an eight-month low in July, dampening hopes of a soft landing for the economy.

Separately, Switzerland's annual inflation rate held steady at 1.3% in July, in-line with expectations.

With a light data calendar in Europe, investors are focused on U.S. labour market data, due later in the day, where a below-expectations reading would only accelerate the risk-off sentiment.

"Don't expect this level of correction over the past couple of days to continue, however, we could still see some choppy trading as the macro volatility is high due to GDP and inflation releases," Chedid added.

Among other movers, British Airways owner IAG jumped 5.4% after it delivered a better-than-expected second-quarter profit and dividend while terminating its proposed takeover of Spain's Air Europa.

French insurer AXA was up 2.2% after BNP Paribas said it is in exclusive talks with the company to acquire its AXA Investment Managers arm for 5.1 billion euros ($5.50 billion).

French energy company Engie surged 8.9% after it lifted its profit forecast following first-half results that beat expectations.

($1 = 0.9268 euros)

(Reporting by Pranav Kashyap in Bengaluru; Editing by Janane Venkatraman and Sonia Cheema)