Oils, political risk depress European shares

European shares fell in early trade on Tuesday as political risk reared its head with a reported missile launch by North Korea, further dampening a rally that has added a third to equities since early March.

At 0708 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 852.27 points, on track for its third day of falls in the last four.

The index, which is up 33 percent since hitting a lifetime low on March 9, was weighed down by oils, with BP, Royal Dutch Shell and Total falling 0.8 to 1.2 percent, tracking a $1.10 per barrel fall in crude.

French foods group Danone tumbled 7 percent after saying it planned a near 3 billion euro ($4.2 billion) rights issue, and Rio Tinto fell 3 percent after agreeing with Nippon Steel to cut key iron prices by a third.

North Korea fired two short-range missiles off its east coast, Yonhap news agency quoted a South Korean government source as saying. On Monday, the reclusive state tested its second nuclear device.

Analysts said the moves had underlined political risk as a factor in markets but stressed investors were in wait-and-see mode anyway.

"We are stuck in the middle of nowhere, between the 200-day moving average and 30-day moving average, with investors not wanting to take a clear position before any trend is confirmed," said Thierry Lacraz, strategist at Swiss bank Pictet.

"I would expect the North Korea political event to weigh on the market for one or two days, not more — markets are waiting for new macro data, new announcements, and volumes have diminished a lot in the past three weeks."