* FTSEurofirst 300 at lowest level in around 2 weeks
* AstraZeneca slumps after rejecting "final" Pfizer bid
* Deutsche Bank down after capital increase, impacts bank stocks
By Sudip Kar-Gupta
LONDON, May 19 European equities slid on Monday, pulled down by pharmaceuticals group AstraZeneca, which slumped after rejecting a Pfizer takeover bid, and by Deutsche Bank, where a capital increase weighed on bank stocks.
The pan-European FTSEurofirst 300 index, which last week hit a 6-year high of 1,372.81 points, fell 0.9 percent to 1,349.79 points in mid-session trading - its lowest level in around two weeks. The euro zone's blue-chip Euro STOXX 50 index also fell 1 percent to 3,140.41 points.
AstraZeneca's shares dropped 12 percent to take the most points off the FTSEurofirst 300, after it rejected a sweetened "final" cash-and-stock offer from Pfizer, causing uncertainty as to whether the U.S. drugmaker would pull off its plan to create the world's biggest pharmaceuticals group.
"Despite Pfizer having spent a large amount of money and time, the signal seems clear from AstraZeneca's board of directors, UK politicians and mainstream media that this is a bad deal, and we see limited efforts from Pfizer going forward," said Peter Garnry, head of equity strategy at Saxo Bank.
"Its shareholders will not appreciate a fourth attempt as it will inflate the valuation too much relative to deal risk," he added.
BANK SHARES WEAKEN
Deutsche Bank weakened by 1.9 percent after it announced an 8 billion euro capital increase.
The fall in Deutsche Bank pushed the STOXX Europe 600 Bank Index down by 1.7 percent, with some analysts and investors expecting that other banks may also have to raise capital to strengthen their balance sheets.
"The banks are under all sorts of pressure at the moment. I think that quite a few investors got into the banks' rally quite late and have been caught out at the top," said Rupert Baker, equity sales executive at Mirabaud Securities.
In spite of Monday's pullback, some investors were still upbeat on the prospects for European equities.
Richard Marwood, senior investment manager at AXA Investment Management, said prospects that the European Central Bank (ECB) could cut interest rates next month were providing a relative safety net for equities, since any such move by the ECB would hit returns on bonds and enhance the appeal of equities.
"It's not going to be a straight-line recovery and people will lose confidence in it at times. But you've got a safety net (from central banks) and I still think the stock market is a better place to be than the bond market," he said.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (additional reporting by Francesco Canepa Editing by Jeremy Gaunt)