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Commods, banks drag European shares lower

Published 06/08/2009, 04:29 AM
Updated 06/08/2009, 04:32 AM
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* FTSEurofirst 300 down 1.5 percent

* Oils, miners fall on softer raw materials prices

* Banks fall, with Fortis leading losers

* For up-to-the-minute market news, click on

By Dominic Lau

LONDON, June 8 (Reuters) - European shares fell in Monday morning trade, led by commodity stocks on softer raw material prices as the dollar strengthened, while banks slipped with Fortis leading the losers.

By 0810 GMT, the FTSEurofirst 300 index of top European companies was down 1.5 percent at 859.40 points, after gaining 1.2 percent last week.

Oil producers were hurt by softer crude prices. Majors BP, Royal Dutch Shell, Total and Repsol were down 0.6 percent to 1.8 percent.

The dollar rose against a basket of currencies, extending sharp gains made late last week as U.S. Treasury yields rose to seven month highs, prompting investors to cover short dollar positions.

In the mining sector, Rio Tinto, BHP Billiton, Anglo American, Xstrata and Kazakhmys fell between 3.3 and 4.4 percent on weaker metal prices.

"It looks to me there is another element of selling coming in now. The market has been trading sideway for some time. They are trying to break the range one way or another," a trader said.

Banks were another drag on the market.

Fortis sank 6.8 percent after the financial group said it faced a legal claim for 362.5 million euros ($506 million) from a former unit now owned by the Dutch state.

UBS slipped 1.7 percent. Swiss newspapers quoted UBS board member Bruno Gehrig as saying the bank was "not out of the woods yet" as it was still seeing outflows of client money. UBS declined to comment.

In the UK, Barclays lost 2.5 percent. The bank said it is in talks to sell Barclays Global Investors, with U.S. fund manager BlackRock the frontrunner to land the asset manager, according to people familiar with the matter.

Across Europe, Britain's FTSE 100 fell 1.4 percent, Germany's DAX dropped 1.8 percent and France's CAC 40 was down 1.7 percent.

LOOKING FOR VISIBILITY

"The market is trying to get some visibility on the 2010 economic outlook. At the moment there is relatively little ... on that," said Darren Winder, equity strategist at Cazenove.

"Investors are looking to get some indications about what's happening to the underlying level of demand. At the moment there is very little information about that. Until we see that the market may just continue to move sideways."

The FTSEurofirst 300, which is up 3.2 percent this year, has risen 33 percent since hitting a lifetime low in early March.

Porsche put on 0.9 percent after German weekly Focus reported the Gulf state of Qatar will strike a deal with the company by mid-June that help it to pay down its 9 billion euro debt pile.

Volkswagen, in which Porsche holds nearly 51 percent of the voting stock, advanced 3.5 percent.

In the pharmaceutical sector, Novartis added 1.2 percent after the Swiss drugmaker said its Afinitor medicine significantly cut tumour size by 50 percent or more in a third of patients with lymphoma in a mid-stage clinical trial. Lundbeck slumped more than 10 percent after it said it might postpone an application for approval in the U.S. of anti-depression drug candidate Lu AA21004 following completion of the first phase III trials of the drug.

(editing by John Stonestreet)

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