Banks, basic resources drag down European shares

* FTSEurofirst 300 index falls 0.5 percent

* ArcelorMittal drags down basic resources shares

* Banks down; UBS slips on investment bank losses

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Atul Prakash

LONDON, Oct 26 (BestGrowthStock) – European equities fell on Tuesday
as basic resources shares slipped after ArcelorMittal (ISPA.AS: )
forecast extended weakness for the sector, while UBS (UBSN.VX: )
led financials down following losses at its investment bank.

At 0814 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top
European shares was down 0.5 percent at 1,086.29 points after
rising 0.3 percent on Monday to hover near a six-month high.

ArcelorMittal (ISPA.AS: ) fell 4.6 percent after the world’s
largest steelmaker predicted a far weaker-than-expected fourth
quarter due to muted demand, lower prices and higher raw
material costs. BHP Billiton (BLT.L: ), Anglo American (AAL.L: ) and
Xstrata (XTA.L: ) fell 0.9 to 1.4 percent. [ID:nLDE69O0SQ]

“There are going to be some headwinds for companies,” said
Koen De Leus, strategist at KBC Securities, in Brussels.

“You had high productivity which boosted margins, but what
you see now is that companies have problems in passing on high
raw material prices to the customers and that’s going to put
pressure on their margins.”

Financial stocks also featured among the top losers, with
the STOXX Europe 600 banking index (.SX7P: ) falling 1 percent
mainly because of a 4.9 percent drop in shares in Switzerland’s
largest bank UBS (UBSN.VX: ) as losses at its investment bank
spoiled the company’s third-quarter results. [ID:nLDE69O0N5]

Standard Chartered (STAN.L: ), Barclays (BARC.L: ), BNP Paribas
(BNPP.PA: ) and Deutsche Bank (DBKGn.DE: ) fell 0.7 to 2 percent.

Across Europe, the FTSE 100 (.FTSE: ), Germany’s DAX (.GDAXI: )
and France’s CAC 40 (.FCHI: ) fell 0.4 to 0.8 percent.

QUANTITATIVE EASING

Investors stayed cautious ahead of the next week’s meeting
of the U.S. Federal Reserve, which is expected to pump more
money into the economy, but there was no clear consensus on how
much cash it might inject.

New York Fed President William Dudley said whether an
incremental or big-bang approach to asset purchases would work
better depended on the economic context. [ID:nNLLPLE6LF]

“We had a rally since August and now people are waiting to
see whether this quantitative easing is going to come through or
not. There are still some uncertainties and the (stock) market
is going to be range-bound until the meeting of the Fed,” De
Leus said.

Among individual movers, Germany’s Merck KGaA (MRCG.DE: ) fell
0.8 percent after it cut its full-year sales outlook on slower
demand for its liquid crystal (LC) chemicals for flat screens.
[ID:nLDE69J0UR]

Dutch telecoms group KPN (KPN.AS: ) rose 1.4 percent as it
said it would meet its full-year target after reporting
better-than-expected third-quarter results driven by higher
service revenue growth in Germany and strong margins.

ARM Holdings (ARM.L: ) fell 3.4 percent after the chip
designer reported its third-quarter results and as one of its
U.S. licensees, Texas Instruments (TXN.N: ), warned that its
fourth-quarter revenue will be hurt by slowing demand.

“While ARM has a great business model and remains well
placed to outperform the broader semiconductor industry, it is
ultimately a play on the semiconductor market and dependent on
the end consumer demand,” Execution Noble said in a note.

(Editing by Erica Billingham)

Banks, basic resources drag down European shares