Banks, oils push European shares to two-week low

European equities slipped for a fourth session yesterday to a two-week closing low as financials lost ground on concerns over some banks' exposure to Ukrainian debt, while weaker crude oil prices hurt energy shares.

The FTSEurofirst 300 index of top European shares ended down 0.8 per cent at 1,002.95 points, the lowest close since November 6. It fell 1.6 per cent during the week after gaining in the previous two weeks.

Banks were among the top losers as speculation over Ukrainian debt resurfaced, even though analysts said there was no fresh development to trigger the sudden fright.

Ukraine's acting Finance Minister Ihor Umansky said last week that the state railway company was seeking to restructure a $550 million syndicated loan organised by Barclays after failing to repay a portion of it.

The DJ Stoxx European banking sector index fell 1.5 per cent, while Commerzbank, Swedbank, Société Générale, Deutsche Bank, Credit Agricole and UBS dropped between 2.3 per cent and 3.7 per cent.

Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 fell 0.3-0.8 per cent. European Central Bank President Jean-Claude Trichet said at a banking conference that banks risk becoming addicted to cheap central bank cash used to fight the financial crisis and must prepare for its eventual withdrawal.

But analysts said the recent weakness in equity markets was not an indication of a trend reversal and positive momentum remained intact.

"We had recent new highs in some of these markets so for them to correct back now after having another strong run probably wouldn't be too unusual," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.

"Having said that, they haven't broken convincingly to new highs, so maybe the markets are levelling off and can become a bit more volatile. May be they are running out of steam for now on the upside," he added.

Energy shares tracked crude oil prices, which fell more than 1 percent on a stronger dollar. BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol and Total shed 0.2 to 1.4 per cent. Defensive shares such as pharmaceuticals and food producers saw some demand, with GlaxoSmithKline, Merck, Novo Nordisk, Roche Holding, Sanofi-Aventis and Shire gaining 0.1 to 1.4 per cent.

Among food producers, Danone, Kerry Group, Unilever and Associated British Foods were up 0.5 to 1.6 per cent.

Cadbury gained 1.3 per cent. Business daily Il Sole 24 Ore said Italian chocolate maker Ferrero could be interested in Cadbury's gum and candy division, a unit worth about €5 billion ($7.4 billion), in a possible joint takeover bid.

"We're still stuck in a tight range and this could last until December," said David Thebault, head of quantitative sales trading at Global Equities in Paris.

Deutsche Telekom was down 0.5 per cent. It is keeping its options open for its US business and is not close to making a decision on the unit's mid-tem future, two people familiar with the matter said.