* FTSEurofirst 300 down 0.2 percent
* Cyprus closed awaiting vote on tax deal
* Banks slide as euro zone debt worries reignite
* Miners fall on waning China demand
* Iliad lead telcos higher on forecast beat
By David Brett
LONDON, March 19 European shares fell in choppy
trade by midday on Tuesday as investors tried to hold their
nerve after Cyprus's bailout package stoked anxiety about the
euro zone's debt crisis.
The island's stock exchange suspended trade on Tuesday and
Wednesday and banks remained shut as its parliament looked ready
to reject the unprecedented levy on bank accounts, heightening
the risk of an eventual financial collapse.
"It is worrying that the senior members of the euro zone and
International Monetary Fund cannot see the huge risks of
destroying euro zone guarantees ... All the good work over the
last six months to stabilise the fund flows from the periphery
has just been nuked," said Lee Robinson, director of Altana
Distressed Assets Fund.
Markets, however, were relatively calm. By 1118 GMT, the
FTSEurofirst had shed 0.2 percent to 1,197.19, while the euro
zone blue chip index fell further, down 0.5 percent
Investment banks such as Citigroup and Credit Suisse saw
limited risk of the Cyprus events triggering wider selloffs,
although others predict heightened selling pressure and a surge
in "risk-off" trades if Cyprus does not pass the deal.
While the current calm was reflected in the peripheral bond
markets where yields remained relatively unchanged, other areas
of the market were emitting warning signs.
Volatility - a crude gauge of investor fear - on
equity markets has spiked 22 percent since Friday, albeit from
"All the sell-side banks are saying this is not a huge game
changer, but they are conflicted (given their exposure to
Europe) and cannot say anything else," Altana's Robinson said.
The unprecedented support from central banks for the
financial system continues to deter stock markets at multi-year
highs from retreating further.
"The markets are still focusing on the belief that central
banks will always be there to save the day," Andreas Hoefert,
chief economist at UBS.
He said, however, that the developments in Cyprus are
symbolic of a deeper lack of trust in policy in Europe, which
could eventually trigger a repositioning among investors.
Banks and insurers - those financial
institutions most exposed to Europe's debt crisis - each fell
0.4 percent on Tuesday, while the euro zone banking sector has
shed 3.7 percent so far this week.
The broad, sharp sell-off in European banks, however, could
create buying opportunities, with Espirito Santo highlighting
Barclays, BNP Paribas and Societe Generale
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.
Global miner 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, on earnings
Precious metal miner Fresnillo also fell 3.6
percent as Deutsche Bank cut its rating to "sell" from "hold" on
valuation grounds, saying the stock already prices in a near
perfect delivery of its robust medium-term growth prospects.
Away from the miners, capital goods firm Weir shed
3.3 percent after Berenberg downgraded its recommendation to
"hold" also on valuation grounds.
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.
Chip designer ARM Holding slipped 2.8 percent after
announcing its chief executive Warren East is stepping down
after nearly 12 years in the role.
On the upside, France's Iliad led the telecoms
sector higher, rising 6.6 percent to be the top
performer in Europe after its earnings beat forecasts.
German retailer Metro added 4.4 percent after UBS
upgraded the company to "buy" saying it thought the company's
chief executive, Olaf Koch, would accelerate sales of some