* Vienna stock market down 3 pct as Erste slumps
* Erste drags down other rival banks
* Broader European markets remain near multi-year highs
* FTSEurofirst 300 closes down 0.3 pct but near 6-1/2 year
* 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
reached multi-year highs this week.
Erste dropped 16.4 percent after the bank, the third-biggest
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 rival Raiffeisen
and weighed on Vienna's benchmark ATX index,
which fell by 3 percent and underperformed other major European
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 3.1-3.2 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 3.5 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.
That index, which had risen for the last three days in a row
to hover near 6-1/2 year highs, slipped by 0.3 percent to
1,394.15 points on Friday.
The euro zone's blue-chip Euro STOXX 50 index
also retreated 0.6 percent to 3,270.47 points.
Trading activity was thin on Friday, with the U.S. stock
market shut for the July 4 holiday.
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 Robin