* Concerns over Portuguese banks hits Lisbon market
* FTSEurofirst 300 down 0.2 pct
* ECB expected to keep rates at record lows
By Sudip Kar-Gupta
LONDON, Aug 7 Concerns about Portugal's banking
system hit the Lisbon stock market on Thursday and weighed on
European equities, which were also kept in check by tensions
between Western powers and Russia.
Investors were also holding off from taking big equity
positions ahead of a European Central Bank (ECB) policy meeting
and news conference by ECB President Mario Draghi, due later in
The ECB is set to hold fire on rates as it waits for earlier
stimulus measures to gain traction, while keeping an eye on
risks from the conflict in Ukraine, where Kiev forces are
fighting pro-Russian separatists.
Lisbon's benchmark PSI-20 index was down by 0.7
percent, underperforming the broader, pan-European FTSEurofirst
300 index which was down 0.2 percent at 1,320.72
Traders said the Lisbon market remained impacted by worries
over the state rescue of Portuguese bank Banco Espirito Santo
, which was hit by financial problems associated with
its Espirito Santo founding family.
Investors are concerned that lenders who contribute to a
bank recapitalisation fund, through which the state injected 4.9
billion euros to carve out a healthy new bank out of Banco
Espirito Santo, may end up paying a chunk of the rescue bill.
"The prevailing sentiment in Portugal's stock market is
gloomy. The negative sentiment towards the banks in general is
shared not only by investors but also by the public at large,"
said Ricardo Evangelista, an analyst at London-based brokerage
European stock markets were also pegged back by ongoing
tensions between Western powers and Russia.
Russian state news agency Ria Novosti said late on Wednesday
that Russia will ban all food imports from the United States and
fruit and vegetables from the European Union, in an escalation
of the economic battle with the West set off by the crisis in
Many German companies, such as Adidas, have
significant business interests in Russia and could therefore be
impacted by sanctions.
Germany's main DAX equity index was down by 0.2
percent, close to a near 5-month low hit on Wednesday as the DAX
continued to retreat from a record high reached in late June.
"The Russian sanctions are likely to hit Germany, although I
think equity market prices could bounce back from here in the
near term," said HED Capital head Richard Edwards.
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 Blaise Robinson; Editing by Toby