Weak earnings and ECB doubts hit European shares
* FTSEurofirst 300 falls 0.9 pct, Euro STOXX 50 down 0.6 pct
* Banking index falls 1.9 pct on weak UBS, Deutsche Bank results
* Scepticism over ECB meeting this week hits stock markets
By Sudip Kar-Gupta
LONDON, July 31 (Reuters) - European shares suffered their biggest intraday fall in more than a week on Tuesday, hit by weak bank results and fresh doubts over whether the European Central Bank (ECB) could agree on concrete measures to tackle Europe's sovereign debt crisis.
The FTSEurofirst 300 index closed down 0.9 percent to 1,063.35 points - its worst one-day fall since a 2.4 percent decline on July 23.
The Euro STOXX 50 index fell 0.6 percent to 2,325.72 points, with banks among the worst-performing sectors as the STOXX European banking index declined by 1.9 percent.
Traders and investors voiced doubts over whether the ECB's meeting on Thursday would result in clear new actions to fight the crisis, given signs of disagreement among European policymakers over the measures which could be taken.
"It's a realisation that nothing significant is going to come out of this meeting on Thursday," said Toby Campbell-Gray, head of trading and risk at Tavira Securities.
Equity markets were also hit after Germany's finance ministry reiterated its view on Tuesday that there was no need to grant a banking licence to the euro zone's new European Stability Mechanism (ESM) bailout fund.
A banking licence would allow the ESM - which is due to replace the current temporary EFSF bailout fund - to borrow cash from the European Central Bank and purchase bonds from heavily indebted countries such as Spain or Italy.
France has been behind a push to give the ESM bailout fund a banking licence, but the ECB has repeatedly rejected the idea, arguing it would be a thinly disguised monetary financing of governments.
WEAK RESULTS FROM TOP EUROPEAN BANKS
Europe's top banks are heavily exposed to the region's debt crisis, which has resulted in a sovereign bailout for Greece and could spread throughout the area, and many of the sector's major lenders posted lower profits on Tuesday.
Switzerland's UBS reported that its second-quarter profit more than halved to 425 million Swiss francs ($435.70 million), while Deutsche Bank also posted lower profits and announced plans to cut 1,900 jobs.
Oil major BP also weighed on European stock markets after it reported results that undershot market expectations and slashed $5 billion off the value of its U.S. assets, with BP's shares closing down 4.4 percent.
Out of the 44 percent of European companies to have reported so far, 47 percent have fallen short of expectations, according to Thomson Reuters Starmine data.
Worries over the euro zone debt crisis led European fund managers to slash their equity holdings in July, preferring the safety of cash while they also increased their exposure to U.S assets, a Reuters poll showed on Tuesday.
Cyrille Urfer, who heads asset allocation at Swiss bank Gonet, said he remained underweight on European equities, preferring emerging market equities and European high yield bonds.
Urfer said that even if the ECB revived its bond purchase programme following its meeting this week, it might not be enough to fix Europe's underlying economic problems, such as the lack of a fiscal union within the euro currency bloc and persistent political disagreements over the crisis.
"We have a limited exposure to the European marketplace. The challenges are huge and I'm not convinced that the meeting will immediately reassure the market. It might ease some of the short-term pressure but it might not be enough to address some of the underlying issues," he said.
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