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Banks, miners drag European shares lower

Published 08/04/2009, 06:47 AM
Updated 08/04/2009, 06:51 AM
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* FTSEurofirst 300 falls 0.7 pct after Monday's 9-month high

* Banking, mining, car stocks decline

By Christoph Steitz

FRANKFURT, Aug 4 (Reuters) - European shares declined on Tuesday after hitting a nine-month high a day earlier, with banks weighing on the index as strategists pointed to profit-taking following a solid run up over the past few weeks.

At 1029 GMT the FTSEurofirst 300 index of top European shares was down 0.7 percent at 935.16 points. However, the index is still up 45 percent since falling to a lifetime low in early March. Since July 10 the index has risen about 15 percent, mainly boosted by positive earnings from U.S. and European big-cap companies.

"Today, the market is taking a breath as equity markets have gained very strongly over the past weeks," said Postbank equity strategist Heinz-Gerd Sonnenschein.

"Therefore, it's rather about taking profits today."

Banking stocks took the most points off the index, and the DJ STOXX European Banks Index, which is up 141 percent since March 9, was down 1 percent.

Swiss bank UBS dropped 5.6 percent, after the company posted a second-quarter net loss of 1.4 billion Swiss francs ($1.32 billion), which compared with an average forecast from analysts in a Reuters poll for a loss of 1.1 billion francs.

Lloyds, Societe Generale and HSBC were down between 1.4 percent and 1.9 percent.

MINERS DECLINE

Mining stocks were down and the DJ STOXX European Basic Resources Index was the top sectoral decliner, down 2.3 percent, with BHP Billiton, Anglo American, Antofagasta and Rio Tinto down 2.1-4.3 percent.

"If you run up so fast and so far it's quite natural that you have some profit-taking," said Luc Van Hecka, chief economist at KBC Securities.

"But the overall trend is certainly positive and the market is of the opinion that the worst is over. It is responding quite logically to the fact that earnings have generally been better than expected," he added.

Car stocks also retreated, with the DJ STOXX European autos sector index the second-biggest sectoral decliner, down 1.8 percent.

BMW fell 3.9 percent despite the company posting a second-quarter operating profit ahead of expectations.

"Despite good financial performance in H1/2009 we are still sceptical on German premium manufacturers, especially on BMW and thus confirm our sell recommendation," DZ Bank wrote in a note.

Across Europe, UK's FTSE 100 index, Germany's DAX and France's CAC 40 were down 0.7-0.9 percent. ($1=1.061 Swiss francs) (Additional reporting by Atul Prakash in London; Editing by Greg Mahlich)

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