European shares lost ground on Friday, with satellite firm Eutelsat plunging after slashing its outlook for the year, while Bouygues rose on well-received results.

The pan-European FTSEurofirst 300 index fell 0.5 per cent by 0810 GMT, while the euro zone's blue-chip Euro STOXX 50 index fell 0.8 per cent.

European markets have lacked clear direction in recent weeks, with some investors blaming strength in the euro and uncertainty surrounding a referendum on EU membership in Britain and a political stalemate in Spain.

“We're are quite cautious about the European market even though valuations are not expensive. Before taking big bets investors need to know what will happen on the political front and where will the euro go,” said Matteo Ramenghi, Chief Investment Officer at UBS WM Italy.

Eutelsat fell 30 per cent, making it the biggest faller in the region. The satellite firm cut its outlook for the full year after markets closed on Thursday and was met with a spate of ratings downgrades on Friday.

“Such a heavy hit to forecasts, coming from across the applications, will knock confidence in the story,” Barclays said in a note, downgrading the stock to “equal-weight” from "overweight” and slashing its target to 22 euros from 31 euros.

The insurance sector was the biggest sectoral faller with a drop of 1.7 per cent, led lower by Italy's UnipolSai which fell 3.4 per cent with traders saying its earnings update and new business plan had no big surprises.

French construction-to-media conglomerate Bouygues rose 2.8 per cent after an operating loss and revenues beat forecasts.

Carmaker BMW fell 3.4 per cent as the stock traded ex dividend.

The oil sector index fell 0.4 per cent after crude oil prices fell as a stronger dollar weighed and Russia warned that a global crude supply overhang could last into next year.

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