By Tommy Stubbington

European shares fell sharply Wednesday, amid renewed concerns over the conflict in Ukraine and the toll it is taking on the region's economy.

The Stoxx Europe 600 index fell 0.6% in early trade. The drop echoed a slump on Wall Street, which traders said began with a warning from a Polish official about the potential for Russia to invade Ukraine.

Germany's DAX index led declines, falling 0.9% to a fresh five-month low. German stocks have fared worst during the escalation of Western sanctions against Moscow over the Ukraine conflict, given the country's deep trade and energy links with Russia.

Russian President Vladimir Putin said Tuesday he has ordered his government to prepare retaliatory measures against U.S. and European economic sanctions imposed on Russia.

Underlining the risks to Europe's economy, data early Wednesday showed German manufacturing orders surprisingly tanked in June. Germany's Economy Ministry said concerns about geopolitics likely held back orders.

Elsewhere, France's CAC-40 fell 0.4%, while the U.K.'s FTSE 100 was down 0.7%.

The German data dented the euro, which slipped 0.2% to a fresh nine-month low of $1.3349 against the dollar.

The common currency's renewed slide this week suggests "markets are beginning to price greater negative impact on the euro-zone economy from escalating sanctions against Russia," currency strategists at BNP Paribas said.

Safe-harbor assets such as German government debt gained. Germany's 10-year yield fell 0.2 percentage point to 1.15%, closing in once more on its recent all-time low of 1.11%.Reports from Ukraine "will undoubtedly keep markets on their toes, ready to make another run for safe havens when the situation appears to escalate," said interest-rate strategists at Rabobank.

Gold also climbed, adding 0.5% to trade at $1,292.30. Brent crude oil was 0.1% higher at $104.76.

Write to Tommy Stubbington at tommy.stubbington@wsj.com

(END) Dow Jones Newswires

August 06, 2014 04:16 ET (08:16 GMT)

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