* FTSEurofirst 300 down 0.4 pct after sharp two-week rise
* Reports on capital reform, stress tests pressure banks
* Tax fears hit miners as Australia's Gillard secures office
By Harpreet Bhal
LONDON, Sept 7 (Reuters) - European shares fell on Tuesday,
stubbing out a two-week rally, with banks hit by concerns over
the sector's health and the impact of capital reform, while
miners dropped on renewed jitters over Australia's tax plan.
The pan-European FTSEurofirst 300 <> index of top
shares closed 0.4 percent lower at 1,061.79 points, after
gaining almost 7 percent over the past two weeks.
The Euro STOXX 50 <>, the euro zone's blue chip
index, was down 1 percent at 2,727.16 points, dropping back
below its 50 percent Fibonacci retracement of a fall from an
April high to a May low.
Banks were pressured by a report in the Wall Street Journal,
which said recent stress tests in the European banking sector
understated some lenders' holdings of potentially risky
government debt.
Among the fallers, Societe Generale <SOGN.PA>, Dexia
<DEXI.BR> and Deutsche Bank <DBKGn.DE> fell 1.7 to 3.9 percent.
Adding to the concerns, Germany's Die Zeit newspaper,
quoting a draft proposal from the Basel committee, reported that
global banks would be required to hold Tier 1 capital of 9
percent, including a 3 percent so-called "conservation buffer".
[]
The Basel committee, in charge of drawing up global banking
rules, agreed tougher new capital rules on Tuesday but will keep
investors on tenterhooks until Sunday when formal endorsement is
expected. []
"Nobody really knows yet how these reforms will affect the
banking sector and that is making the market quite nervous,"
said Oliver Roth, head trader at Close Brothers Seydler Bank in
Frankfurt.
Barclays <BARC.L> fell 2.7 percent. The bank said Bob
Diamond, head of its investment and wealth management business,
would succeed John Varley as group chief executive.
In the mining sector, Xstrata <.XTA.L>, BHP Billiton <BLT.L>
and Rio Tinto <.RIO.L> were off 1.4 to 1.8 percent, after
Australian Prime Minister Julia Gillard secured a second term in
office, with her government vowing to press ahead with a new
mining tax.
MACRO HEADWINDS
Investors were also rattled by poor macroeconomic data from
Germany, and a weak outlook for U.S. employment.
German manufacturing orders in July unexpectedly fell 2.2
percent, their steepest rate in more than a year, dragged by
below-average volume in big orders. []
In the United States, the Conference Board's Employment
Trend's Index declined in August, signaling that employment
growth may continue to slow in the coming months. []
"There still is some doubt about economic growth in the
second half," said Koen De Leus, economist at KBC Securities.
"We have just had a relief rally and investors are waiting to
see what direction the economy is going to take in the second
half."
Bucking the weak trend, Invensys <ISYS.L> climbed 7.4
percent, with traders citing a newspaper report that the
engineering group is a takeover target. An Invensys spokesman
declined to comment.
Nokia <NOK1V.HE> added 4.5 percent, and touched its highest
level in 12 weeks, after Morgan Stanley upgraded its
recommendation on the stock to "overweight" and raised earnings
forecasts for the world's top cellphone maker.
Across Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC <> were 0.6 to 1.1 percent lower.
(Additional reporting by Joanne Frearson; Editing by Sharon
Lindores)
