European shares pulled lower by banks and BP

By Brian Gorman

LONDON (BestGrowthStock) – European shares fell at midday on Wednesday, with BP (BP.L: ) leading the energy sector down after the launch of a criminal probe into the Gulf of Mexico disaster, and with banks weaker on worries about the euro zone crisis.

At 1045 GMT, the pan-European FTSEurofirst 300 (.FTEU3: ) index was down 0.8 percent at 994.59 points.

The European index has lost more than 10 percent since mid-April when fears intensified that a sovereign debt crisis in the euro zone could derail the global economic recovery.

BP fell 2.4 percent, following a 13.1 percent drop in the previous session. The company has lost more than a third of its market value, or about 46 billion pounds ($67 billion), since the crisis began.

“Markets are worried about the political solution for BP, and that some of the assets might be seized,” said Colin McLean, managing director at fund manager SVM in Edinburgh.

The U.S. FBI and other federal agencies are investigating the spill and “if we find evidence of illegal behavior, we will be forceful in our response,” U.S. Attorney General Eric Holder said on Tuesday.

The prospects of tougher restrictions on the industry as a whole hurt other energy shares, as did crude prices falling toward $72, with the euro only slightly up from a four-year low against the dollar.

Total (TOTF.PA: ), ENI (ENI.MI: ), BG (BG.L: ), Royal Dutch Shell (RDSa.AS: ) and Repsol (REP.MC: ) fell between 1.2 and 2.4 percent.

The heavyweight banking sector was also lower.

Banco Santander (SAN.MC: ), BBVA (BBVA.MC: ), Credit Agricole (CAGR.PA: ) and Societe Generale (SOGN.PA: ) fell between 2.3 and 2.7 percent.

“There is real concern about European financials. It’s not clear what the actions of the ECB are,” McLean said. “There’s an extent to which the markets may be being propped up by the buying of debt, and short-selling bans create something of an artificial market. Investors question whether they’re seeing the truth in balance sheets.”

Across Europe, the FTSE 100 (.FTSE: ) index, Germany’s DAX (.GDAXI: ) and France’s CAC 40 (.FCHI: ) fell between 0.8 and 1.2 percent.

GLAXOSMITHKLINE RISES

Among other individual shares, GlaxoSmithKline (GSK.L: ) rose 1.4 percent after Jefferies raised its rating for the company to “buy” from “hold.”

Britain’s Prudential (PRU.L: ) fell 2.8 percent after abandoning its plan to buy AIG’s Asian life unit AIA for $35.5 billion, bowing to shareholder criticism over the price it had agreed to pay and leaving its management under fire.

Later in the session, investors will eye the May U.S. Challenger layoffs report, due at 1130 GMT, a precursor to Friday’s U.S. nonfarm payrolls.

April U.S. pending home sales will be released at 1400 GMT.

Investors were also digesting the German government’s decision to widen a ban on speculative trades on Wednesday, expanding restrictions on naked short-selling to include all shares.

The planned legislation, which must pass both houses of parliament, adds to regulations set up last month in a campaign by Chancellor Angela Merkel’s government to curtail financial speculation, which it blames for intensifying the euro zone debt crisis.

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(Editing by Sharon Lindores)

European shares pulled lower by banks and BP