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Europe closes down on the week as Iraq weighs

European shares closed lower for the seventh time in eight sessions on Friday. Geopolitical tensions continued to rattle investors' nerves.

The pan-European FTSEurofirst 300 closed provisionally down 0.6 percent on the day and 2.0 percent on the week on Friday at 1,306.1 points.

The German Dax closed in correction territory on Friday at around 9,011.1, down more than 10 percent from a high of 10,050.98 in June. The Dax—which is dominated by companies that are dependent on Russian energy— fell through the psychologically important barrier of 9,000 points earlier in the session.

The French CAC closed down 0.1 percent on the day, near a correction point of 4138.8.

However, Italy's FTSE MIB closed provisionally higher by 0.3 percent, after a new constitutional reform package was given the green light by policymakers.


Symbol
Name
Price
 
Change
%Change
Volume
FTSE
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DAX
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CAC 40
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IBEX 35
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Iraq back in focus

The U.S. launched airstrikes against Iraqi militants on Friday, in its first attack of this kind since the military pulled out in 2011. This came directly after the U.S. began an aid drop on to Iraqi civilians in the northwest of the country.

Read MoreUS begins airstrikes against Iraq militants

U.S. stocks rose on Friday, as investors judged that U.S. participation in Iraq would still be small.

"Iraq is a tragedy, but the president made clear our engagement is going to be limited," said David Kelly, chief market strategist at J.P. Morgan Funds.

"While the markets always sell off immediately in the face of uncertainty, it doesn't take long to realize this airstrike against ISIS (the Islamic State in Iraq and Syria) doesn't change the geopolitical picture in any significant way."

Markets also pared some losses after Russia media reports suggested Russia was seeking to de-escalate the conflict in Ukraine. This came after NATO Secretary General Anders Fogh Rasmussen called on Russia "to step back from the brink" and withdraw troops from the Ukraine border on Thursday.

In addition to simmering geopolitical tensions, traders have cited concerns about the possible raising of interest rates by the U.S. Federal Reserve within the next few months. I

There has also been heavy selling in some of the European periphery's banking stocks.

"Markets are worried about a rate hike but geopolitical risk isn't helping," Jasper Lawler, a market analyst at CMC Markets said in note. "The summer slump has kicked into full gear."

On the data front, Germany's trade balance for June showed imports grew at their fastest rate for nearly four years.

Meanwhile, industrial production in France rose more than expected in June.

In corporate news, Air France-KLM saw a 1.9 percent jump in passenger traffic in July. But it wasn't enough to boost shares, which closed nearly 3 percent lower.

Shares in trouble-struck Italian lender Monte dei Paschi closed around 8.3 percent lower after weaker-than-expected results. Shares originally failed to open on Friday.

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