European shares fall as debt worries resurface

* FTSEurofirst 300 closes 1 pct lower

* Banks major fallers as risk appetite slips

* M&A news limits losses; Danisco jumps 24 percent

By Brian Gorman

LONDON, Jan 10 (BestGrowthStock) – European shares fell sharply on
Monday, giving back some of last week’s gains, as worries about
the euro zone debt crisis once again took centre stage ahead of
debt auctions this week.

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top
shares fell 1 percent to close at 1,133.24 points, after rising
2 percent last week.

The heavyweight banking sector, which has exposure to
sovereign debt in peripheral euro zone countries, was a major
loser. BNP Paribas (BNPP.PA: ), Banco Santander (SAN.MC: ), Intesa
SanPaolo (ISP.MI: ), Societe Generale (SOGN.PA: ) and UniCredit
(CRDI.MI: ) fell between 2.7 and 5.7 percent.

Greek banks (.FTATBNK: ) fell 6.6 percent.

“There’s nervousness that bond spreads and default spreads
are widening and general nervousness after we had a good run,
with a bit of profit-taking,” said Mark Bon, fund manager at
Canada Life in London.

A euro zone source said pressure is growing on Portugal from
Germany, France and other euro zone countries to seek financial
help from the EU and IMF to stop the bloc’s debt crisis from
spreading, though Germany said aid for Lisbon was not on the
agenda for an upcoming European Union finance ministers meeting.
[ID:nLDE7090SF]

“It highlights the problems of whether the bailout fund will
be sufficient to meet everybody’s expectations,” Bon said. But
he added: “Any weakness is a buying opportunity. I see positive
returns 10 to 15 percent this year. Earnings season should show
that the fundamentals of most companies are solid.”
Investors will eye bond auctions from Portugal, Spain and
Italy later this week for signs on whether indebted sovereigns
will be able to raise funds at sustainable levels in 2011.

Merger and acquisition (M&A) activity helped to limit losses
for key indexes. Danisco (DCO.CO: ) soared 24 percent after U.S.
chemicals group DuPont (DD.N: ) said it would buy the Danish food
ingredients and enzymes firm for $5.8 billion to boost its
position in the fast-growing food sector. [ID:nN09219516]

Smith & Nephew (SN.L: ), Europe’s largest maker of replacement
knees and hips, rose 9.5 percent, and hit a record high on a
report it received a bid last month from Johnson & Johnson
(JNJ.N: ), which was not disclosed. [ID:nLDE7080EX]

Across Europe, Britain’s FTSE 100 (.FTSE: ) ended the day 0.5
percent lower; Germany’s DAX (.GDAXI: ) and France’s CAC 40
(.FCHI: ) fell 1.3 and 1.6 percent respectively.

Spain’s IBEX35 (.IBEX: ), Italy’s FTMIB (.FTMIB: ) and
Portugal’s PSI20 (.PSI20: ) fell between 1.3 and 2.4 percent.

EARNINGS SEASON

Some investors were cautious ahead of the U.S. earnings
season in the United States, with aluminium giant Alcoa Inc
(AA.N: ) scheduled to release results after markets close on
Monday.

“It’s a typical thing to see investors removing a bit of
risk off the table before the earnings season starts,” said
Joshua Raymond, markets strategist at City Index.

“If we get a decent forecast-beating result from Alcoa, it
could set a positive tone and entice investors to come back and
buy from the lows in the market.”

Other U.S. firms set to report this week include Intel
(INTC.O: ) and JPMorgan Chase & Co (JPM.N: ).

“There is enough in the background to remind investors that
it’s not plain sailing and there clearly are risks which are a
source of instability for markets,” said Mike Lenhoff, chief
strategist at Brewin Dolphin.

Among individual movers, BP (BP.L: ) shed 1.3 percent after
the Trans Alaska Pipeline, which carries oil for the company,
was closed for a second day on Sunday due to a leak.
[ID:nN09216312]

French drugmaker Sanofi-Aventis (SASY.PA: ) fell 1.7 percent
after the French drugmaker said it had entered direct talks with
bid target Genzyme (GENZ.O: ). [ID:nLDE7090BX]

(Editing by David Cowell)