REFILE-Banks lead European shares lower in early trade

Thu Dec 17, 2009 4:57am EST

(Corrects spelling of "banks" in headline")

* FTSEurofirst 300 falls 0.4 percent

* Banks take most points off index; Greek banks slide

* For up-to-the-minute stocks news, click on [STXNEWS/EU]

By Brian Gorman

LONDON, Dec 17 (Reuters) - European shares fell back from a one-month closing high in early trade on Thursday after the U.S. Federal Reserve reiterated its special liquidity measures would expire early next year.

At 0940 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 0.4 percent at 1,027.34 points, having hit a one-month closing high on Wednesday.

The European benchmark is still up more than 59 percent from its lifetime low on March 9, with several major economies having emerged from recession.

The heavyweight banking sector took the most points off the index. BBVA (BBVA.MC), BNP Paribas (BNPP.PA), Banco Santander (SAN.MC), Barclays (BARC.L), HSBC (HSBA.L), Lloyds Banking (LLOY.L) and Societe Generale (SOGN.PA) fell between 0.6 and 2.3 percent.

Greek banks were among the worst performers due to ongoing worries about the country's deficit. Alpha Bank (ACBr.AT), Piraeus Bank BCPr.AT, National Bank of Greece (NBGr.AT) and EFG Eurobank EFGr.AT fell between 3.7 and 4.2 percent.

Few other sectors were having a major impact on the index. Some energy companies were lower as crude prices CLc1 hovered just above $72 a barrel. Total (TOTF.PA) and BG (BG.L) were down 0.7 and 1.2 percent, respectively.

The dollar surged to three-month highs on Thursday, knocking down a succession of barriers, as investors wound up short positions for the year after a more upbeat tone from the Federal Reserve helped support its recent rebound. [ID:nTOE5BG05F]

FED STICKS TO PLAN

U.S. markets gave up their earlier gains and closed little changed on Wednesday. The Fed voiced growing optimism on the economy as job losses slow, but repeated a vow to keep interest rates unusually low for "an extended period".

Underscoring improving conditions for banks, the Fed said it would stand by plans to shutter most of its emergency lending facilities on Feb. 1, showing growing confidence that credit markets could stand on their own. [ID:nN16119711]

Later, investors will turn their attention to the weekly jobless claims data in the United States, due at 1330 GMT, and the leading indicators index, at 1500 GMT.

"Markets are still trying to find a trend and establish whether the improvement in the economy is due to stimulus packages," said Justin Urquhart Stewart, investment director at Seven Investment Management.

Among individual shares, pharmaceutical group Shire (SHP.L) fell 1.7 percent after UBS cut its rating to "neutral" from "buy".

Urquhart Stewart pointed to a fall in Hong Kong as another possible reason for a weaker European market.

"There's some nervousness from the east this morning, with Hong Kong weaker with the number of IPOs," he said.

The Hang Seng .HSI index of Hong Kong shares was down 1.2 percent.

Across Europe, Britain's FTSE 100 .FTSE, France's CAC40 .FCHI and Germany's DAX .GDAXI were down between 0.3 and 0.4 percent. (Editing by Karen Foster)

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