* Italian and Spanish stock markets fall
* Traders cite concerns over European elections this week
* Rising demand for protection against FTSE MIB falling
* FTSEurofirst 300 flat, but still near six-year highs
* Raiffeisen rallies after Q1 results
By Sudip Kar-Gupta
LONDON, May 22 Italian and Spanish stocks
underperformed flat equity markets elsewhere in Europe on
Thursday, as traders said concerns about this week's European
Parliament elections made investors cautious.
Italy's FTSE MIB share index was down by 1.4
percent in late-session trading, while Spain's IBEX
stock market was off 0.3 percent.
Both underperformed the pan-European FTSEurofirst 300 index
, which was flat at 1,365.24 points - still within
touching distance of a six-year high of 1,372.81 points set last
Some strategists say the European election results could
destabilise some euro zone governments.
In Greece, a strong showing by anti-bailout parties may hurt
an already-fragile coalition, potentially paving the way to
national elections. In Italy, a poor result for Prime Minister
Matteo Renzi's party might weaken his drive for the swift
reforms he promised when he took power in a party coup.
Yields on Spanish and Italian bonds stabilised on Thursday.
Yet demand to protect against falls in Italian shares has
also risen sharply in the past week as investors fear that a
strong showing for the Eurosceptic 5-Star Movement may weaken
Some investors also remained concerned about the gap between
Germany - Europe's economic powerhouse - and weaker southern
European states such as Spain, Portugal and Italy. A purchasing
managers' survey on Thursday showed Germany's private sector
expanded steadily this month, whereas data last week showed a
contraction in the Italian economy.
The European Central Bank may unveil measures next month to
help the euro zone economy, such as a rate cut, which would keep
the euro in check.
However, some traders say any ensuing fall in the euro may
still not be enough to help the region's weaker economies, such
as Spain and Italy.
"Economic prospects rarely determine which way stock markets
will go but the situation in southern Europe is now so dangerous
for all business there that these times may be an exception,"
said HED Capital head Richard Edwards.
"Keep selling rallies," he said.
Austria's Raiffeisen Bank was the best-performing
stock on the FTSEurofirst 300 index. It rose 5.4 percent after
posting first-quarter profits that exceeded market expectations.
Raiffeisen also said it could soon pay back nearly 2 billion
euros ($2.73 billion) in state aid.
The broad rally in European equity markets since the start
of 2014 has been maintained by expectations of new European
Central Bank stimulus measures, and by corporate takeover
The FTSEurofirst 300 has gained around 4 percent this year.
Italy's FTSE MIB is up around 7 percent, Spain's IBEX has risen
6 percent, outperforming around a 2 percent gain in Germany's
($1 = 0.7318 Euros)
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 Larry
King and Susan Fenton)