Growth and bank health woes weigh on European stocks

European shares fell for the fourth straight session yesterday amid doubts about a return to economic growth, which hammered commodity stocks, and with banks in the red on fresh concerns about US financial sector health.

The FTSEurofirst 300 index of top European shares fell 1.9 per cent to 845.76 points - its lowest close since May 15 - but remains up 1.7 per cent year-to-date.

"We've seen a couple of weak days but no radical sell-off," said Commerzbank chief strategist Hans-Juergen Delp, who attributed the downward move to a persistent discrepancy between upbeat sentiment indicators and weak real economy data.

"The sentiment indicators have been positive but have not been backed up by hard real economic data," he said.

"We need new impulses to kick off sustained gains but no such impulses are in sight."

Banks took the most points off the European benchmark index. Standard & Poor's lowered its ratings and revised its outlooks on 22 US banks.

"Operating conditions for the industry will become less favourable ... characterised by greater volatility in financial markets during credit cycles, and tighter regulatory supervision," S&P said, adding the changes also reflected an ongoing broad-ranging reassessment of industry risk for US financial institutions.

In Europe, Allied Irish Banks tumbled 17 per cent, Dexia lost 6.8 per cent, Deutsche Bank and Credit Suisse both fell four per cent, and UBS dropped 3.9 per cent.

London copper fell to a near two-week low as doubts about the global economic recovery renewed worries over metals demand.

Among miners, Xstrata plunged 10.2 per cent, Rio Tinto lost 7.8 per cent, Anglo American fell 6.3 per cent and BHP Billiton was down 3.9 per cent.

Steelmakers also suffered, notably ArcelorMittal, which dropped 6.4 per cent to its lowest close in three weeks.

Softer oil prices hit energy stocks, with Repsol down 3.2 per cent, BP down 2.4 per cent and Total down 2.2 per cent.

Economic data yesterday showed the eurozone's unadjusted exports fell 27 per cent year-on-year in April and imports dropped 28 per cent.

Bank of England policymakers acknowledged recent data on Britain's economy had been encouraging but stuck with gloomy projections published in May, minutes to this month's policy meeting showed.

The Swiss State Secretariat for Economic Affairs lowered its forecast for the domestic economy to contraction of 2.7 per cent this year and 0.4 per cent in 2010, suggesting a deeper and longer recession than so far anticipated.

US package delivery company FedEx Corp gave an outlook well below Wall Street estimates, saying the next two quarters would be "extremely difficult" although there were signs that the pace of economic decline had slowed.