European shares fall as Airbus leads aerospace sell-off

By Jesus Calero, Shashwat Chauhan and Shristi Achar A

(Reuters) -European shares declined on Tuesday as Airbus tumbled after a profit warning and sparked an aerospace-related sell-off, while investors focused on French parliamentary elections later in the week.

The continent-wide STOXX 600 ended 0.2% lower.

Airbus tumbled 9.4% and was among the biggest drags on the index, after Europe's largest aerospace group cut its industrial and financial targets and took a hefty 900 million euro ($965 million) charge for its space activities.

Its profit warning and forecast for fewer plane deliveries dragged jet-engine manufacturers Rolls-Royce and MTU Aero Engines lower.

The wider STOXX Europe aerospace and defence index slid 3.8% to its lowest in over three months.

The tech sub-index, which houses some of Europe's biggest chip-related firms, rebounded from near three-week lows earlier in the session to close 0.2% higher.

Chipmakers are among the best-performing sectors in Europe, with the index jumping 15% so far this year.

"We're seeing a pretty healthy broadening of a longer-term equity rally." said Tom Gehlen, senior market strategist at SG Kleinwort Hambros. "Tech stocks had an amazing run and it's nothing but healthy that they're taking a bit of a pause giving opportunity to investors to catch their breath and reposition."

The market remains focused on the first round of French parliamentary elections and a key U.S. inflation report due later this week.

Paris stock market operator Euronext's CEO said the prospect of a politically extreme party with little or no government experience reaching power is worrying investors.

"(Polls) suggest that the centre will be depopulated as voters swing to the extremes on the left and right," economists at Pantheon Macroeconomics noted.

"We think the main outcome of such a result is political stalemate rather than crisis, but the stakes are high for France and Europe alike."

France's benchmark CAC 40 slipped 0.6% amidst the broader sell-off.

Among other stocks, Germany's Merck shed 5.7% after the drugmaker said it had stopped trials for xevinapant in advanced head and neck cancer.

French lab testing firm Eurofins gained 4% after falling as much as 25% on Monday when short seller Muddy Waters took a short position in the company.

Novo Nordisk's shares advanced 4% to a record high after the Danish pharmaceutical giant said its weight-loss drug Wegovy had been approved in China.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru and Jesus Calero in Gdansk; Editing by Rashmi Aich, Savio D'Souza and Richard Chang)