Banks drag European shares lower; techs up

European shares fell yesterday, led by banking stocks on investor concerns over how Greece will finance its debt as talks to hammer out details of a potential aid plan began.

The pan-European FTSEurofirst 300 index of top shares closed down 0.7 per cent at 1,096.10 points. The index which gained nearly 26 per cent in 2009 is only up 4.8 per cent this year.

Across Europe, the FTSE 100 index fell one per cent, Germany's DAX lost 0.5 percent and France's CAC 40 slipped 1.2 per cent. Banks snapped the previous session's gains to feature among the worst performers. HSBC, Banco Santander, BNP Paribas and UBS lost 1.4 to 3.4 per cent. Greek bank shares fell nearly three per cent.

"The equity markets problems are really because of the sovereign debt concerns and the political discussions surrounding it ... there is still uncertainty," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

"US company earnings have been good, but investors are still staying on the sideline." Technology stocks got some support after Apple's results beat expectations, with Ericsson and Alcatel-Lucent both rising 1.6 per cent.

In other results news, Volkswagen gained 3.8 per cent after it said first-quarter operating profit nearly tripled. Energy stocks were out of favour following sharp rises in the previous session. Crude slipped 0.4 per cent after government oil inventory data showed crude stockpiles rose 1.9 million barrels last week, against a forecast for a slight drop.

BP, BG Group and Total fell 1.1 to 2.6 per cent. Miners were also on the downside. Gold trimmed early gains as the euro fell, while aluminium slipped back 1.3 per cent.

BHP Billiton lost 2.8 per cent after it reported lower quarterly production across metals and coal, with copper particularly hard hit and iron ore lagging that of rival Rio Tinto. Anglo American, Antofagasta and Rio Tinto were down 2 to 2.8 per cent. Food retailers were among the gainers, benefitting by Goldman Sachs's move to up its target on the sector to "neutral" from "cautious". Tesco, WM Morrison, J Sainsbury, Jeronimo Martins and Metro AG added 0.7 to 4.4 per cent.