Debt worries haunt European shares; banks slip

* FTSEurofirst 300 down 0.9 percent

* Fitch says UK’s fiscal challenge is “formidable”

* German utilities down on tax hike

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

By Harpreet Bhal

LONDON, June 8 (BestGrowthStock) – European shares fell on Tuesday,
extending a sell-off into a third straight session, with
heightened concerns over sovereign debt after Fitch Ratings said
the UK faced a “formidable” challenge.

By 1114 GMT, the pan-European FTSEurofirst 300 (.FTEU3: )
index of top shares was down 0.9 percent at 981.75 points.

Shares in Germany’s utilities were lower, with RWE (RWEG.DE: )
falling 3.6 percent and E.ON (EONGn.DE: ) down 3.7 percent on the
back of a government announcement to impose a tax on nuclear
fuel. [ID:nLDE6561E9]

Fitch said the UK may not be able to rely on spending cuts
alone to cut its deficit over the medium term, which warrants a
faster pace of medium-term reduction than set out in the
previous government’s budget. [ID:nLDE6570YW]

Concerns over fiscal health in European countries and the
impact of austerity plans on economic growth have been nagging
financial markets, with the FTSEurofirst 300 down close to 12
percent since mid-April.

“People are moving into gold and they’re not keen to hold
equities, certainly as we’re testing key psychological levels as
we’ve seen today with the FTSE 100’s move below the 5,000
level,” said Matthew Brown, sales trader at ETX Capital.

Banks, a gauge of investors’ appetite for risk, fell across
the board, with Barclays (BARC.L: ), Societe Generale (SOGN.PA: ),
BNP Paribas (BNPP.PA: ), Banco Santander (SAN.MC: ) and Deutsche
Bank (DBKGn.DE: ) off 0.3 percent to 1.6 percent.

Adding pressure to the sector, European finance ministers
sought agreement on Tuesday on how to make banks pay for
financial crises. [ID:nLDE6570M1]

Across Europe, Britain’s FTSE 100 (.FTSE: ), Germany’s DAX
(.GDAXI: ) and France’s CAC40 (.FCHI: ) were down between 0.9
percent and 1 percent.

BP SLIPS

BP (BP.L: ) lost 3.8 percent as U.S. President Barack Obama
stepped up his attack on the company following an oil spill in
the Gulf of Mexico. BP shares are down more than a third from
mid-April. [ID:nN08211982]

Within the sector, BG (BG.L: ), Royal Dutch Shell (RDSa.L: ),
Total (TOTF.PA: ) and ENI (ENI.MI: ) fell 1 percent to 1.4 percent,
as crude prices (CLc1: ) hovered around $71 a barrel on concerns
about the euro zone debt crisis and subdued optimism over U.S.
demand.

British supermarket group Tesco (TSCO.L: ) fell 3.2 percent
after Terry Leahy, chief executive for 14 years, said he was
stepping down next year. [ID:nLDE6570BS]

On the economic front, Germany’s trade surplus widened
slightly in April but analysts said a dip in exports was
temporary and that foreign demand and the weak euro would
continue to fuel growth in Europe’s largest economy.
[ID:nLDE65709Y]

Earlier, markets had been encouraged by upbeat remarks from
U.S. Federal Reserve Chairman Ben Bernanke, who said European
leaders are committed to ensuring the survival of the euro and
have enough money to meet obligations of heavily indebted member
countries.

He also said the U.S. economy appeared to have enough
momentum to avoid a “double-dip” recession, citing strengthening
consumer and business spending.

Investing Research

(Editing by Elaine Hardcastle)

Debt worries haunt European shares; banks slip