European shares slip by midday; financials weigh
* FTSEurofirst 300 index falls 1.2 pct
* Financials shares among top losers
* Automakers, miners lose ground
* For up-to-the-minute market news, click on [STXNEWS/EU]
By Atul Prakash
LONDON, May 28 (Reuters) - European shares fell on Thursday after three straight days of gains, dragged lower by worries that mounting government debts to fund economy stimulus packages could raise borrowing costs for companies.
At 1130 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was 1.2 percent lower at 860.20 points. The benchmark, which plunged 45 percent in 2008, has risen more than 30 percent since hitting a lifetime low in early March.
Concerns over the amount of debt needed to fund the record $1.75 trillion U.S. budget deficit fuelled a selloff in U.S. government bonds, driving the yield on benchmark 10-year Treasuries US10YT=RR to a six-month high the previous session. Yields edged lower on Thursday.
"It's not good news (for equities) at least in the near term. The market is telling us that its views on the U.S. economy are not as optimistic as they were a few months ago," said Peter Dixon, economist at Commerzbank.
"The market has reached a plateau and we have started to trade in much more narrow ranges," he said, adding shares could remain under pressure in the near term.
Financial stocks were among the biggest losers, with HSBC (HSBA.L), Barclays (BARC.L), Lloyds (LLOY.L), Natixis (CNAT.PA) and Swedbank (SWEDa.ST) down between 1.7 and 5.2 percent.
The DJ Stoxx banking index .SX7P fell 1.6 percent, as rising yields on U.S. government debt fuelled concern that businesses and consumers could face higher borrowing costs, which could hamper an economic recovery.
"People are worried about inflation with all the money that's being pumped into the system. That could nip the economic recovery in the bud," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC-40 .FCHI fell around 1 percent.
AUTOS IN FOCUS Continued...
