* Lisbon's PSI 20 sinks 1.8 pct on Espirito Santo family
* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 up 0.5 pct
* Sodexo hit after poor update
(Adds details, updates)
By Francesco Canepa
LONDON, July 9 Portuguese shares lagged mixed
European markets on Wednesday, hit by concerns about the health
of one of the country's largest financial groups.
Lisbon's PSI index fell 1.8 percent, led by a 6.5
percent fall in Espirito Santo Financial Group, the top
shareholder of Portugal's largest listed bank by assets, Banco
Espirito Santo (BES), itself down 3.9 percent.
The family behind BES is said to be considering
debt-for-equity swaps as it grapples with financial problems at
its holding companies, casting a shadow on the wider Portuguese
financial sector and triggering a spike in Lisbon's sovereign
The PSI, which has risen 24 percent in the past 12 months,
has underperformed other European markets since concerns
surrounding Espirito Santo arose and also after the release of
some disappointing economic data last month.
"Investors are starting to wake up to this bad coffee,"
Franz Wenzel, chief strategist at AXA Investment Managers, said.
"Also they've made fairly decent returns (on Portuguese shares)
so why not taking profit and take some shelter."
Shares in Portugal Telecom also hit a record low
and were down 4.2 percent on lingering concerns over its 897
million euro ($1.22 billion) investment in another Espirito
Santo holding company, traders said.
Trading volume on Portugal Telecom and BES was over three
times their full-day averages for the past three months on a
relatively quiet day for European equity markets.
At 1448 GMT, the pan-European FTSEurofirst 300 index
had gone through less than 60 percent of its average
The index, which hit a 6-1/2 year high in late June, was
down 0.1 percent at 1,362.54 points. The euro zone's blue-chip
Euro STOXX 50 index, meanwhile, was up 0.5 percent,
recovering some ground after a 1.4 percent fall in the previous
A disappointing trading update from French caterer Sodexo
, coming hard on the heels of a profit warning from Air
France-KLM on Tuesday, fuelled concerns about weak
corporate earnings ahead of the second-quarter reporting season.
Sodexo saw its shares fall 1.7 percent after it said its
fourth quarter would be weaker than expected due to the delayed
start-up of some major contracts. The group cut its full-year
sales growth goal.
"There are some worries that some company results may not be
as strong as expected," said Berkeley Futures associate director
($1 = 0.5877 British Pounds)
(Additional reporting by Andrew Winterbottom and Sudip
Kar-Gupta; Editing by Toby Chopra)