European shares slip further on regulation concerns

* FTSEurofirst 300 declines 0.9 pct; down for 3rd day

* Financials slip on regulation concerns, debt crisis

* Technicals paint bearish picture

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

By Atul Prakash

LONDON, May 21 (BestGrowthStock) – European share prices slipped
further on Friday, with heightened concerns over euro zone
sovereign debt and government spending and tougher financial
industry regulations hurting sentiment.

Germany is poised to approve the lion’s share of a $1
trillion safety net for financially-troubled euro zone nations
as an EU task force looks to toughen economic regulations within
the bloc blighted by a debt crisis that has cast a pall over
global economic health.

At 0801 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top
European shares was down 0.9 percent at 966.52 points after
falling as low as 960.68 earlier in the session. It fell about 5
percent in the previous two sessions and traded not far from an
eight-month low of 957.73 hit on May 7.

The index has fallen more than 13 percent since hitting a
high about 5 weeks ago. It is down 4.7 percent for the week and
has declined 7.6 percent so far this year.

Energy shares were among the top losers on concerns that any
setback to global economic recovery will hurt oil demand. Crude
prices (CLc1: ) fell 0.8 percent, putting pressure on BP (BP.L: ),
Royal Dutch Shell (RDSa.L: ), BG Group (BG.L: ), Tullow Oil (TLW.L: ),
Repsol (REP.MC: ) and Total (TOTF.PA: ), all down 0.3 to 3 percent.

“Europe has certainly not been talking with a unified voice,
which casts some doubt about the way this sovereign crisis will
be handled. If you put on top of that a bit of less enthusiastic
support for growth scenario, you get a correction,” said Luc Van
Hecka, chief economist at KBC Securities.

France and Germany, co-founders of the euro, had clashed
over a unilateral German ban on some speculative trades on
Wednesday. The Franco-German dispute highlights the mammoth
mission ahead for EU finance ministers meeting on Friday to
discuss reinforcing economic surveillance and budget discipline
to avoid another Greek-style debt crisis in the euro area.

WALL STREET REFORM

Further weighing on sentiment, the U.S. Senate on Thursday
approved a sweeping Wall Street reform bill, which threatens to
constrain the banking industry (Read more about the banking industry recovery.) and reduce its profits for years
to come. [ID:nN20244272]

“Everybody is very well aware that if there is one calamity
that we should avoid at all cost is the second round in asset
deflation,” Van Hecka said.

“I suppose measures will be taken to avoid that, which means
that perhaps central banks will have to come out again with some
guarantees that liquidity will be provided and that interest
rates will be kept low.”

Appetite for risky assets such as equities fell, with the
VDAX-NEW volatility index (.V1XI: ) rising more than 5 percent to
hover near Thursday’s 14-month highs. 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.

Financials slipped for a third straight session, with the
STOXX Europe 600 banking index (.SX7P: ) falling 1.7 percent.
Standard Chartered (STAN.L: ), HSBC (HSBA.L: ), Barclays (BARC.L: ),
Lloyds (LLOY.L: ), Royal Bank of Scotland (RBS.L: ), BNP Paribas
(BNPP.PA: ), Societe Generale (SOGN.PA: ), Credit Agricole (CAGR.PA: )
and Natixis (CNAT.PA: ) fell 0.7 to 3.3 percent.

Chartists said the European index had broken a key support of
967 points — an eight-month closing low in early May — and a
close below the level could trigger a deeper correction towards
890, the 50 percent Fibonacci retracement of its rise from a
record low in March last year to a high in mid-April of 2010.

Among individual movers, British Airways (BAY.L: ) fell 0.6
percent. It posted a record 531 million pounds ($762 million)
full-year loss, hit by strikes and winter snow, though said it
had managed to cut costs by around 1 billion pounds due to
restructuring efforts.

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(Editing by Greg Mahlich)

European shares slip further on regulation concerns