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European shares off four-month highs; banks slip

Published 09/10/2010, 07:44 AM
Updated 09/10/2010, 07:48 AM
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* FTSEurofirst 300 down 0.2 percent

* Banks among top losers on Basel, Deutsche Bank

* Nokia gains on news of hiring new chief executive

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

By Atul Prakash

LONDON, Sept 10 (Reuters) - European shares retreated from four-month highs on Friday, with banks slipping ahead of the Basel Committee meeting and on a report Deutsche Bank plans a capital increase of up to 9 billion euros ($11.4 billion).

At 1103 GMT, the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,079.79 points. It closed on Thursday at its highest level since late April.

Financial stocks were among the top losers, with the STOXX Europe 600 banking index falling 0.7 percent. Barclays, Credit Agricole and Credit Suisse fell 1 percent to 2.3 percent.

The Basel Committee of central bank and regulatory officials agreed a proposal for tougher new global bank capital rules on Tuesday but plans to keep the details confidential until Sunday.

"There is a little bit of nervousness ahead of exactly what's going to come out from the new regulation that is going to be discussed over the course of the weekend," said Henk Potts, equity strategist at Barclays Wealth.

The recommendations go to the committee's oversight body, the Group of Governors and Heads of Supervision (GHOS), which meets in the Swiss city on Sunday, chaired by European Central Bank President Jean-Claude Trichet.

Deutsche Bank slipped 5 percent after two people familiar with the matter said Germany's top lender was considering a capital increase to bolster its balance sheet as Basel III capital requirements are finalised.

"It shows that some may still need to go through the process and that speculation is probably being reflected in some of the financial prices that you have seen today," Potts added.

A big cash call would allow Deutsche Bank to raise its stake in Deutsche Postbank, in which it already owns just under 30 percent, and recapitalise that business, but is also seen as a move to tap the markets first before any rivals that need to raise funds once new capital rules are agreed.

Deutsche Postbank shares were up 4.2 percent.

"Deutsche is the strongest, and it's going first -- who's behind them?" said Philip Isherwood, equity strategist at Evolution Securities in London.

More German banks are expected to follow. The 10 biggest may need 105 billion euros in fresh capital under the new capital rules, the German Banking Association has said.

National Bank of Greece also launched a rights issue this week, and more lenders in Greece, Spain, Portugal and Italy could tap investors for funds, analysts estimate. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on European banks' capital raising:

http://r.reuters.com/cyw42p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

MINERS SLIDE

Miners came under pressure from lower metals prices, with copper falling on concerns about tighter policy in top consumer China. BHP Billiton, Anglo American, Rio Tinto, Xstrata and ENRC fell 1.2 to 2 percent.

Spain's Gas Natural fell 3.9 percent after French utility GDF Suez sold its entire 5.01 percent stake through a block trade for a total of 540 million euros ($685.1 million).

BP was down 0.7 percent. The company said it would delay the release of its third-quarter results by a week because of added complexities in its accounts due to costs associated with the Gulf of Mexico oil spill.

Mobile phone maker Nokia rose 4.3 percent after it hired Stephen Elop, the head of Microsoft's Business Division, to replace its chief executive.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC40 fell 0.1 to 0.4 percent.

"Fundamentals still look good. Investors over the course of the past few weeks have been unnerved by some weaker data points. If we start to see that stabilising, investors will focus back on fundamentals and should increase their risk appetite," Potts of Barclays said. (Additional reporting by Brian Gorman, Graphics by Vincent Flasseur; Editing by Will Waterman)

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