* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 down 0.2 pct
* Softened Basel III liquidity requirement boosts banks
* Peugeot up as stake sale report prompts short covering
By Blaise Robinson
PARIS, Jan 7 European shares dipped on Monday,
taking a breather from their new year rally, although losses
were limited by gains in banking shares propelled by regulators'
decision to ease new liquidity rules for the sector.
At 0924 GMT, the FTSEurofirst 300 index of top
European shares was down 0.1 percent at 1,165.77, while the UK's
FTSE 100 index was down 0.3 percent, Germany's DAX index
down 0.4 percent, and France's CAC 40 down 0.4
The euro zone's blue chip Euro STOXX 50 index
was down 0.2 percent at 2,705.22 points.
On Sunday, the Basel Committee of banking supervisors said
they will give banks four additional years and more flexibility
to build up cash buffers, allowing lenders to put some of their
reserves to work, which should boost economic growth.
UniCredit surged 4.2 percent, Societe Generale
added 2.5 percent, BNP Paribas gained 2.1
percent, and Barclays rose 3.5 percent.
"Softening Basel requirements is good news for banks,
bringing a bit of breathing space which will help the sector
continue its recovery," said Lionel Jardin, head of
institutional sales at Assya Capital, in Paris.
"Overall, the market's positive trend is still intact, even
though the Euro STOXX 50 has already reached a major target
around 2,720 points. The market is ripe for a pause, but with so
much cash on the sidelines, there are a lot of buyers showing up
each time we have a dip."
The STOXX euro zone bank index was up 2.1 percent on
Monday. The sector index has jumped 67 percent since late July,
when fears of a break-up of the euro zone started to abate
following comments from European Central Bank President Mario
Draghi about the ECB's determination to do "whatever it takes"
to save the currency bloc.
The Euro STOXX 50 has gained 26 percent since then,
outperforming a 10 percent rise for Wall Street's S&P 500
over the same period.
JP Morgan Cazenove strategists see Europe's outperformance
continuing this year, saying that the region's equities are
attractively valued while the United States faces concerns over
its fiscal situation.
"We still find widespread scepticism towards the region, the
bar is set very low for the potential growth surprise," the
strategists wrote in a note.
Peugeot was among the top gainers in Europe on Monday
morning, up 9 percent as market speculation that the struggling
French carmaker will sell its stake in car parts maker Faurecia
fuelled hopes the company could raise as much as 1.5
billion euros, prompting a wave of short covering.
Peugeot is among the most shorted stocks in Europe, with 18
percent of the company's shares out on loan, according to data
from Markit. Hedge funds with negative bets on the struggling
carmaker are feeling the heat from the stock's 50 percent jump
over the past month, forcing some of them to cover their
position by buying back the shares.