* FTSEurofirst 300 closes down 0.3 pct at 1,139.17 points
* Euro STOXX 50 falls 0.3 pct to 2,651.09 points
* Aeroports de Paris and banks among worst performers
* U.S. budget crisis weighs on equity markets
By Sudip Kar-Gupta
LONDON, Dec 21 Weaker bank stocks led European
shares lower on Friday, unsettled by new signs the United States
may fail to reach a deal to avoid growth-sapping fiscal
Equities fell after the U.S. Republican party failed
overnight to back a plan aimed at averting a "fiscal cliff" of
tax hikes and government spending cuts at the New
Most investors said they still expected U.S. politicians to
reach a deal eventually, but traders were wary of buying new
equity positions before the end of the year.
The pan-European FTSEurofirst 300 index, which had risen to
a 19-month of 1,144.15 points earlier this week, dipped 0.3
percent to 1,139.17 points, with a decline in major bank stocks
contributing to the slide.
The euro zone's blue-chip Euro STOXX 50 index
also retreated by 0.3 percent to 2,651.09 points.
Berkeley Futures associate director Richard Griffiths said
most investors were still "long" on the market, expecting
further gains in January and a deal on the U.S. "fiscal cliff"
Griffiths said Germany's DAX, which fell 0.5 percent to
7,636.23 points on Friday, could rise to 7,800 points in
January, while the Euro STOXX 50 could rise to 2,725 points.
"The market just stopped in its tracks after that unexpected
announcement last night," said Griffiths.
"But it's showing resilience. It's not down by that much and
people think it's just a delay before they reach a deal in maybe
three weeks' time," he added.
BANK STOCKS FALL
Aeroports de Paris, which runs the French capital's
main airports, was the worst-performing stock on the
FTSEurofirst 300, falling 5.4 percent after cutting earnings
The STOXX 600 European banking index was also among
the worst-performing sectors, declining 0.9 percent with UK bank
shares falling after a parliamentary report warned the industry
may need tougher regulation.
"It just adds a bit more negative sentiment towards the
sector," Securequity sales trader Jawaid Afsar said of the
European equity markets are set to end 2012 with solid
gains, helped by a pledge from the European Central Bank (ECB)
in July to offer conditional help if vulnerable euro states
The FTSEurofirst 300 and Euro STOXX 50 are up around 14
percent since the start of 2012, while Germany's DAX has risen
nearly 30 percent.
However, the U.S budget crisis has kept equity markets
choppy this month, with the Euro STOXX 50 Volatility Index
rising 13.6 percent on Friday.
HED Capital head Richard Edwards recommended that investors
go long on the DAX, betting on further gains on that market,
while going short on Spain, Italy and Greece, anticipating falls
in the stocks of these weaker economies.
He expects many fund managers to err on the side of caution
and sell equity holdings to lock in profits before the end of
2012. "You get an awful lot of cascade-selling before the