European shares inch lower as financials decline

* FTSEurofirst 300 edges lower after Monday’s 3-week high

* Financials among top losers, tech shares limit losses

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

By Atul Prakash

LONDON, April 5 (Reuters) – European shares drifted lower on
Tuesday as worries about the euro zone debt crisis hurt banks,
though tech shares firmed after Texas Instruments (TXN.N: Quote, Profile, Research)
offered $6.5 billion for National Semiconductor (NSM.N: Quote, Profile, Research).

A downgrade of Portugal’s credit rating by Moody’s which
said a new government would likely need financing support from
the European Union as a matter of urgency dampened market
sentiment. The European banking index (.SX7P: Quote, Profile, Research) fell 0.7 percent.

Portuguese bond yields rose to their highest since the
euro’s launch as the downgrade added to pressure on the
government to seek a bailout. [ID:nLDE7340J4]

The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) index of top European shares
was down 0.1 percent at 1,140.59 at 1142 GMT, after closing at a
three-week high on Monday. The Thomson Reuters Peripheral
Eurozone Countries Index (.TRXFLDPIPU: Quote, Profile, Research) fell 1.1 percent, while
Portugal’s PSI 20 (.PSI20: Quote, Profile, Research) was down 0.9 percent.

“The various fears have been offset in the last couple of
weeks because companies are still doing well. But I see various
pockets of weakness, in particular in the financial sector,”
said Richard Greenwood, fund manager at Bedlam Asset Management,
which manages about $700 million.

Banks topped the losers’ list, with Bank of Ireland (BKIR.I: Quote, Profile, Research)
down 5.9 percent, Millennium bcp (BCP.LS: Quote, Profile, Research) falling 1.7 percent
and Banco Santander (SAN.MC: Quote, Profile, Research) off 2.5 percent.

Analysts said while the market had priced in a rate hike of
25 basis points by the European Central Bank on Thursday, there
could be a knee-jerk reaction after the announcement. European
equities, however, showed little reaction to China’s hiking
rates for the fourth time since October.

Losses were capped by firmer tech shares, with the sector
index (.SX8P: Quote, Profile, Research) up 0.7 percent after Texas Instruments announced
an agreed takeover bid for National Semiconductor at a 78
percent premium. [ID:nN04281619]

Infineon Technologies (IFXGn.DE: Quote, Profile, Research) rose 2.5 percent, while
STMicroelectronics (STM.PA: Quote, Profile, Research) added 2.6 percent.


Graphics ahead of ECB meeting:

Euro zone credit ratings:



The Euro STOXX 50 (.STOXX50E: Quote, Profile, Research), the euro zone’s blue-chip
index, fell 0.6 percent to 2,938.14.

Analysts said while the short-term technical picture for the
STOXX 50 index had improved following gains in the previous
sessions, the index was looking relatively overbought.

“The latest price action shows that it could be encountering
resistance in the form of its 50-day moving average. It is
possible that selling pressures could develop at these levels,”
said Bill McNamara, technical analyst at Charles Stanley.

“Nevertheless, a close above 3,000 would strongly suggest
the bulls are back in control, the implication being that we
could yet see a run up to 3,040 before it loses momentum.”

Greenwood of Bedlam said there was a flow towards the
European gas sector, given low prices of gas against historical
figures, energy efficiency and relative environmental benefits.

He said Bedlam recently included Royal Dutch Shell (RDSa.L: Quote, Profile, Research)
in its portfolio, adding there was a flow out of some banks due
to concerns about the sovereign debt crisis.

Some caution prevailed ahead of the release of the Federal
Open Market Committee’s minutes from its March 15 meeting, due
at 1800 GMT, for insight on the outlook for U.S. interest rates.

German group TUI AG (TUIGn.DE: Quote, Profile, Research) rose 5 percent after saying
it was in talks to sell a stake in container shipping business
Hapag-Lloyd that it had wanted to float. [ID:nLDE7340YE]
(Additional reporting by Harpreet Bhal; Graphics by Scott
Barber; Editing by Dan Lalor)

European shares inch lower as financials decline