* FTSEurofirst 300 index falls 0.2 percent
* easyJet falls on rating downgrade
* Banco Popolare falls on report on bad debt unit
By Atul Prakash
LONDON, June 30 European shares edged lower in
choppy trading on Monday, with easyJet leading the travel and
leisure sector lower following a downgrade by a major investment
bank and Banco Popolare putting pressure on the banking sector.
The European travel and leisure index fell 0.8
percent, pressured by easyJet. Shares in the budget
airline slumped 5.8 percent, the top faller on the pan-European
FTSEurofirst 300, with traders citing a rating cut by
Bank of America Merrill Lynch to "underperform" from "neutral".
And Italy's fourth-biggest lender Banco Popolare
fell 4.2 percent after its CEO Pier Francesco Saviotti told a
newspaper the bank has cancelled the sale of its bad debt unit
for now and it will look at merger opportunities once it has
passed a Europe-wide health check of the sector.
"The market doesn't like this kind of news ahead of the
upcoming stress test. If a bank is not able to find a buyer at
the desired price, this leaves investors guessing about the
quality of assets and whether further writedowns are necessary,"
Gerhard Schwarz, head of equity strategy at Baader Bank, said.
"The banking sector in general suffers from the lack of
cyclical appetite investors currently have. The recent somewhat
weaker economic numbers in Europe also cast some doubts that
this recovery has a strong momentum. Banks are still suffering
from structural weakness in their profitability."
The European banking index was down 1 percent, the
biggest sectoral decliner in Europe. Banks also put pressure on
the FTSEurofirst 300 index, which was down 0.2 percent
at 1,368.20 points by 1149 GMT after edging higher in early
trading, supported by Philips.
The Dutch conglomerate rose 2.4 percent after saying it will
merge its Lumileds LED components and automotive lighting
divisions into a standalone subsidiary that could potentially be
"Investors are pleased about Philips' decision to spin off
the lighting business by the first half of 2015 as it unlocks
value for shareholders in the large and complicated group whose
activities range from healthcare equipment and lighting to
consumer lifestyle products," Peter Garnry, head of equity
strategy at Saxo Bank, said.
European stocks have risen sharply since mid-March, boosted
by expectations of support from new stimulus measures from the
European Central Bank (ECB), but retreated last week after
downbeat U.S. growth data and worries over violence in Iraq.
Last week was also marked by investment outflows, with
European equity funds seeing redemptions of $1.6 billion, their
biggest outflows in over a year, according to data from BofA
Merrill Lynch Global Research.
But despite the week's pull-back, investors remain positive
on the longer-term. A Reuters poll released last week showed
that investors are bullish on the outlook for European shares in
the second half of the year, betting on them extending their
rally, helped by the ECB's stimulus measures.
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 in Paris; Editing by