* FTSEurofirst 300 index falls 0.4 percent
* Miners slip on weaker metals, profit taking
* Glencore Xstrata falls on concerns of write downs
By Atul Prakash
LONDON, Aug 19 European shares dropped further
on Monday from their recent 2-1/2-month highs, dragged lower by
weaker miners, with persistent concern about a cut in U.S.
stimulus by as early as next month hurting sentiment.
At 0736 GMT, the FTSEurofirst 300 index was down
0.4 percent at 1,226.56 points. The index, which climbed to a
2-1/2-month peak on Wednesday, ended higher last week for a
third straight week and is up 8 percent this year.
Glencore Xstrata, down more than 2 percent, put
pressure on the basic resources sector on news it was likely to
write down the value of assets inherited from Xstrata by as much
as $7 billion.
The STOXX Europe 600 Basic Resources index fell more
than 1 percent to top the decliners' list, tracking a sharp
decline in metals prices on worries the U.S. Federal Reserve may
trim its commodity-friendly measures.
"Weaker metals prices, thin volumes and some profit-taking
are putting pressure on mining shares," said Tom Robertson,
senior trader at Accendo Markets.
"But I imagine that the market is likely to show sideways
movements until September, although any sort of indication from
the Fed to trim its stimulus measures could sway things."
Investors await the minutes of the U.S. Federal Reserve's
last policy meeting on Wednesday for hints on when the central
bank might start scaling back its bond purchases, which have
helped equities in the past months scale new highs.
Yields on 10-year U.S. Treasury debt hit near two-year highs
on Friday, putting upward pressure on borrowing costs across the
"We think potential further increases in yields can be
tolerated by equities. Higher bond yields are helping to broaden
the market leadership and are facilitating an asset allocation
shift away from fixed income. We think the valuation cushion is
still substantial," Mislav Matejka, an analyst at J.P. Morgan
Cazenove, said in a note.
He was positive on cyclical stocks, in particular on banks
and preferred European equities in comparison to U.S. stocks.