* FTSEurofirst down 0.2 percent
* Cyprus tax vote causes volatility spike
* Cyprus stock exchange closed until Thursday
* Banks, insurers fall on debt contagion worries
* Miners retreat as big firms see slower growth in China
By David Brett
LONDON, March 19 European shares fell on Tuesday
with attention focussed on Cyprus's efforts to seal an
international bailout with a controversial levy on bank
The island's Stock Exchange suspended trade on Tuesday and
Wednesday while banks remained shut as its parliament looked
ready to reject the tax, potentially taking it a step closer to
a financial collapse.
By 0833 GMT, the FTSEurofirst 300 fell 0.2 percent
to 1,197.95. It closed just 0.3 percent lower in the previous
session after falling as much as 1.2 percent on fears the levy
would spark bank runs in other struggling euro zone countries.
The sell-off caused a sharp spike in European volatility
- a crude gauge of investor fear - although that settled
down as investors took the opportunity to grab more shares in
big European multinationals on the dips in a market underpinned
by central bank support.
"The markets are currently still focusing on the fact that
central banks will always be there to save the day, the
relatively good economic data out of the U.S. and that there has
been no major sell-off after the Italian election, so investors
are still positioned for a risk-on environment," Andreas
Hoefert, chief economist at UBS, said.
Euro zone finance ministers held an impromptu call on Monday
to stress that the bank levy was a one-off and many analysts
But they also worry that the developments in Cyprus are
symbolic of a deeper lack of trust in policy in Europe and
policymakers' need to make the private sector contribute more to
bailouts. At some point that will see the market reposition
itself, Hoefert said.
Banks and insurers - those financial
institutions most exposed to Europe's debt crisis - each fell
0.4 percent on Tuesday.
Basic resource stocks - demand for which tends to
reflect the outlook for the global economy - were the sharpest
fallers, down 2 percent after Australia's big iron ore miners
cautioned that China can no longer be counted on for unchecked
opportunity, warning prices may fall.
RIO BEATS A RETREAT
Global miners Rio Tinto slid 3.2 percent and BHP
Billiton fell 2.6 percent as Goldman Sachs reduced its
iron ore price forecasts and cut its recommendations on the
firms to "sell" and "neutral", respectively.
"In line with our forecast of falling iron ore prices, we
see minimal free cash flow and significant earnings declines,"
said Goldman on Rio, adding the company to its convictions
On BHP, Goldman Sachs said its strong operations in other
metals were supportive of the company's outlook but it still
expects significant falls in earnings.
Precious metal miner Fresnillo also fell 3.6
percent as Deutsche Bank cut its rating to "sell" from "hold" on
valuation grounds, saying Fresnillo the stock already prices in
a near perfect delivery of its robust medium-term growth
Away from the miners, capital goods firm Weir shed
3.3 percent after Berenberg downgraded its recommendation to
"hold" on valuation grounds.
And German steelmaker ThyssenKrupp fell 5.9
percent on a report it is preparing a capital increase that
would dilute the holding of its biggest shareholder.
On the upside, German retailer Metro added 4.4
percent after UBS upgraded the company to "buy" saying it
believe that the company's chief executive, Olaf Koch, would
accelerate sales of some assets.
France's Iliad led the telecoms sector
higher, rising 6.6 percent to be the top performer in Europe
after it posted earnings which beat forecasts.