* FTSEurofirst 300 down 1 pct; off 2.7 pct on week
* Dividend worries knock KPN shares
* Melrose tumbles on weak outlook
By Tricia Wright
LONDON, Nov 16 (Reuters) - European shares sank to a
3-1/2-month closing low on Friday and chalked up their worst
week since the end of May on persistent concerns over U.S.
fiscal policy and the euro zone debt crisis.
The FTSEurofirst 300 ended down 1 percent at
1,067.45, its lowest close since Aug. 2, taking its weekly loss
to 2.7 percent.
"Investors are pretty cautious and uncertain. It's been a
difficult week," said Michael Hewson, senior markets analyst at
"You've got a growing acceptance that there will be no quick
resolution either in the U.S. or in Europe and ... what people
are starting to do is take a bit of money off the table for the
year, because further upside is likely to be very limited."
Investors were focused on the economic outlook for the
United States, where politicians struggled on in their bid to
avert the 'fiscal cliff' of $600 billion in tax hikes and
spending cuts that could jeopardise growth.
Data on Friday showing an unexpected fall in U.S. industrial
output in October threw the problems facing the world's biggest
economy into sharp relief.
"We've hardly been talking to anyone about what's going on
in Europe. Everyone's worried about America, and I think it's
going to continue," said Will Hedden, a trader at IG in London.
Still, uncertainty over the next steps with regard to
Greece's finances also weighed on sentiment, with banking shares
in the euro zone the worst hit, down 2.7 percent and
giving back yet more of their recent three-month rally.
Against a gloomy macro backdrop, with data released this
week showing the euro zone is already back in recession,
investors faced up to potential cuts to dividend payouts and
fretted about corporate outlooks.
Dutch telecoms group KPN tumbled 7.1 percent, in
brisk volume, on concern over the sustainability of its
Trading volume in KPN stood at more than three times its
90-day daily average, against the FTSEurofirst 300 on 115
percent of its 90-day daily average.
And British engineering group Melrose, which said
the sales outlook for 2013 has become uncertain, was left
nursing an 11.5 percent drop in its share price.
"I don't think any sector is feeling terribly confident
about the future," said Frances Hudson, global thematic
strategist at Standard Life Investments, which has around 158
billion pounds ($250 billion) of assets under management.
"We're going into the festive season with households
wondering how they're going to pay for it, which isn't a strong
underpinning for consumption. And of course consumption is such
a big part of most developed economies."