* Vienna stock market down 3.2 pct as Erste slumps
* Erste drags down other rival banks
* Broader European markets remain near multi-year highs
* FTSEurofirst 300 down 0.1 pct but near 6-1/2 year high
* U.S. market closed for public holiday
By Sudip Kar-Gupta
LONDON, July 4 A slump in the shares of Austrian
bank Erste hit the Vienna stock exchange on Friday and
halted a rally on the broader European equity market which had
hit multi-year highs this week.
Erste dropped by 16 percent after the bank, which is the
third-biggest lender in emerging Europe, warned that fresh hits
from Romania and Hungary would drive it to a record 2014 loss.
Erste also dragged down the shares of Austrian rival
Raiffeisen and weighed on Vienna's benchmark ATX
index, which fell by 3.2 percent and underperformed other
major European stock markets.
The STOXX Europe 600 Banking Index declined 1.2
percent, with other banks with links to eastern Europe also
falling, such as Intesa and UniCredit which
both weakened by 3.4 percent.
"Austria's banking system is particularly vulnerable due to
its historic ties to eastern Europe," said HED Capital head
Edwards backed going "short" to bet on more losses for the
Vienna's ATX, which is one of western Europe's smaller markets.
The ATX is down by nearly 4 percent since the start of 2014,
underperforming a 5 percent rise on Germany's DAX -
which has hit record highs - and a 6 percent advance on the
pan-European FTSEurofirst 300 index.
The broader FTSEurofirst 300 index, which had risen for the
last three days in a row to hover near 6-1/2 year highs, slipped
by 0.1 percent to 1,396.80 points.
The euro zone's blue-chip Euro STOXX 50 index
also retreated 0.4 percent to 3,276.98 points.
Trading activity was thin on Friday, with the U.S. stock
market shut for a national holiday.
In spite of Erste's problems, many traders remained
optimistic that European equities would rally towards the end of
2014, helped by a backdrop of strong U.S. jobs growth and
economic stimulus measures from the European Central Bank (ECB).
They said that, for now, the falls at Erste and the Vienna
market were not enough to hit larger banks and larger European
"The DAX and Euro STOXX are only marginally down, and I
think that the broader market has a much stronger resistance
nowadays to problems such as the ones we are seeing in Austria,"
said Berkeley Futures associate director Richard Griffiths.
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 Ruth
Pitchford and Foo Yun Chee)