Banks lead European shares to seven-week low

* FTSEurofirst 300 down 1.3 pct; hits seven-week low

* Banks slip on Greek, Portuguese debt downgrades

* Shell rises after profit soars

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

By Brian Gorman

LONDON, April 28 (BestGrowthStock) – European shares fell heavily
for a second day on Wednesday, with banks suffering most, as
investors worried about contagion following debt rating cuts for
Greece and Portugal.

At 1050 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top
European shares was down 1.3 percent at 1,055.52 points after
touching 1,047.78 — the lowest since early March. It tumbled
3.1 percent on Tuesday, the biggest one-day fall in five months.

However, the index is still up more than 63 percent from its
record low of March 9. 2009.

“The biggest surprise is that this (the market’s fall) did
not happen earlier, as the problems are very severe,” said
Philippe Gijsels, head of research at BNP Paribas Fortis Global
Markets in Brussels.

“The market is just starting to realise how serious this is.
There are doubts about whether the money will be on the table,
and then whether Greece can take the unpopular measures to
reduce its deficit. And it has been taken for granted there
would not be contagion, but that’s now a big uncertainty.”

Banks were among the top losers, with STOXX Europe 600
banking index (.SX7P: ) falling 1.9 percent. Banco Santander
(SAN.MC: ), Credit Agricole (CAGR.PA: ), Societe Generale (SOGN.PA: )
and UniCredit (CRDI.MI: ) fell between 3.2 and 5.5 percent.

BBVA (BBVA.MC: ) fell 4.6 percent on concerns over Greece’s
debt crisis, though Spain’s second-largest bank beat net profit
expectations in the first quarter.

Rating agency Standard and Poor’s slashed Greek debt to junk
status on Tuesday and also downgraded Portugal, as investors
worried political pressures could block a multi-billion euro
bailout of Greece. [ID:nLDE63P0LU]

The premium investors demand to hold Greek government bonds
jumped to its highest since late 1996 on Wednesday, the euro hit
a one-year low against the dollar and European corporate credit
default swap spreads were wider.

Across Europe, Britain’s FTSE 100 index (.FTSE: ), Germany’s
DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) fell between 0.7 and
1.6 percent.

Spain’s IBEX (.IBEX: ) index fell 2.8 percent and Portugal’s
PSI 20 (.PSI20: ) was down 1.9 percent.

OILS RISE

Energy companies were among the small number of companies to
rise. Royal Dutch Shell (RDSa.L: ) gained 2.8 percent after
reporting a 49 percent rise in first quarter net profit, thanks
to higher oil prices and an unexpected return to production
growth which helped the oil major beat all analysts’ forecasts.

BP (BP.L: ), which reported on Tuesday, rose 1.6 percent.

Nordea (NDA.ST: ), the Nordic region’s biggest bank by value,
bucked the trend in its sector by rising 3.1 percent after
posting better-than-expected first-quarter operating profits and
repeating its forecast for lower risk-adjusted profit this year.
[ID:nLDE63R03F]

Sweden’s Handelsbanken (SHBa.ST: ) rose 5 percent. It reported
a better-than-expected operating profit in the first quarter on
Wednesday as loan losses and costs came in below forecast.
[ID:nLDE63P24G]

Technip (TECF.PA: ) fell 4.3 percent after Credit Suisse
downgraded the oil services company to “neutral” from
“outperform”.

“Valuations are still way too high. Earnings are just not
real. Earnings, and economic data, are just a mirror image of
the deficits governments are running. You have to ask if the
earnings would be there if governments had not bought them,”
Gijsels said.

Investor appetite for risky assets such as equities fell
further, with the VDAX-NEW volatility index (.V1XI: ) rising 13
percent to an 11-week high after surging nearly 19 percent on
Tuesday. The higher the index, which is based on sell and buy
options on Frankfurt’s top-30 stocks (0#.GDAXI: ), the lower the
market’s desire to take risk.
U.S. stock index futures pointed to flat to slightly higher
opening for Wall Street on Wednesday, ahead of the Federal
Reserve’s decision on interest rates and accompanying statement,
which comes after European markets close. No change is expected
[ID:nN27125552]

Stock Market Basics

(Editing by Louise Heavens)

Banks lead European shares to seven-week low