Cyprus bailout plan derails European stock rally

PARIS, March 18 Mon Mar 18, 2013 12:38pm EDT

PARIS, March 18 (Reuters) - European shares closed lower on Monday, slipping from multi-year highs hit last week, as a bailout plan for Cyprus involving a tax on bank deposits rekindled fears of a bank run in the euro zone's most indebted countries.

Shares in southern European banks were among the most hit, with Portuguese lender Banco Espirito Santo dropping 5 percent and Spain's Banco de Sabadell sinking 4.2 percent.

The FTSEurofirst 300 index of top European shares provisionally closed 0.2 percent lower, at 1,200.79 points, while the euro zone's blue chip Euro STOXX 50 index ended 0.7 percent lower at 2,706.30 points.

The FTSEurofirst 300 tumbled as much as 1.2 percent in early trade, before trimming losses as a number of investors saw the drop as an opportunity to increase their holdings in a number of stocks from core Europe, with shares of big European multinationals among the most sought.

AB Inbev, the world's biggest brewer, gained 1.7 percent on the day, while L'Oreal, the world's No.1 cosmetics maker, added 1.2 percent.

"The main concern is not Cyprus, which is quite a small economy, it's the political risk across the euro zone, the way leaders deal with the debt crisis. What if Spain or Italy decide to do the same and tax bank deposits?," said Montaigne Capital fund manager Arnaud Scarpaci.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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