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RPT-Miners lead European shares' biggest fall in 8 weeks

Published 11/16/2010, 07:23 AM

(Repeats to change slugline to read UPDATE 2 instead of UPDATE 1)

* FTSEurofirst 300 down 1.4 percent

* Miners, financials among top decliners

* Worries over Irish debt, China monetary tightening

By Brian Gorman

LONDON, Nov 16 (Reuters) - European shares fell on Tuesday, on concern about Ireland's debt crisis ahead of a key meeting of euro zone finance ministers and with miners among the biggest fallers on renewed talk of China further tightening its monetary policy.

At 1154 GMT the FTSEurofirst 300 index of top European shares was down 1.4 percent at 1,097.15 points after closing 0.8 percent higher in the previous session.

The index is on course for its biggest daily percentage fall since Sept 22, though it is up 70 percent from its lifetime low of March, 2009, boosted by strong company earnings and the economic stimulus measures taken by governments and central banks worldwide. "Investors are worried about the macroeconomic backdrop, and fiscal and monetary policy, and we're likely to see some derating where earnings growth outstrips equity prices," said Richard Batty, investment director, strategy, at Standard Life Investments in Edinburgh.

He added: "In Europe, we're worried that the euro remains overvalued against the dollar."

Miners topped the decliners, as key base metals prices fell on fresh concerns that China, one of the world's top commodity consumers, could further tighten monetary policy.

The STOXX 600 European basic resources sector index fell 3.3 percent, while index heavyweights BHP Billiton, Anglo American and Rio Tinto fell between 3 and 3.1 percent.

"We have certainly seen an increase in uncertainty and the focus has been on Europe and on what's happening with Ireland and the peripheral (euro zone) countries. All eyes are looking towards the Brussels meeting of EU finance ministers," said Keith Bowman, equity analyst at Hargreaves Lansdown.

Euro zone finance ministers are expected to discuss on Tuesday the future euro zone crisis resolution mechanism, which Germany wants to start from 2013, replacing the 440 billion-euro European Financial Stability Facility set up after Greece sought help in May.

The Irish government said it has been holding talks on how to provide stability for its banks and finances but denied a state rescue was needed to stop its problems spilling into other countries.

FINANCIALS SLIP

Financial shares, which often derive strength from a solid macroeconomic environment, were on the back foot, with the STOXX 600 European banking sector index slipping 2.1 percent.

BNP Paribas, BBVA, Credit Agricole, Lloyds, Natixis and Societe Generale fell between 2.5 and 3.7 percent. European shares climbed to a two-year high a week ago on the U.S. Federal Reserve's further stimulus plans, but doubts about whether the Fed would ultimately buy the $600 billion worth of bonds it had promised has put some pressure on equities.

New York Federal Reserve President William Dudley defended on Tuesday the controversial bond-buying programme, saying the Fed was not expressly seeking to devalue the dollar, while he cautioned that the programme was unlikely to generate a spurt of growth.

Among individual movers in European markets on Tuesday was pubs group Enterprise Inns which fell 12.4 percent after the company reported a fall in profit and Seymour Pierce reiterated its "sell" rating.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 fell between 0.8 and 1.6 percent.

The Thomson Reuters Peripheral Eurozone Countries Index was down 1.3 percent. (Additional reporting by Atul Prakash; Editing by Greg Mahlich)

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