Europe shares retreat as banks weigh on sentiment

                                
 * FTSEurofirst 300 index down 1.3 pct, trims recent gains
                                
 * Banks take most points off the index; HSBC down 4.2 pct
                                
 * Astrazeneca rises on positive drug data
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Christoph Steitz
                                
 FRANKFURT, May 11 (Reuters) - European shares retreated on
Monday from their four-month high, with banks taking most points
off the index amid fading optimism about the financial sector.
HSBC <HSBA.L> dropped after releasing a trading update.
                                
 At 0840 GMT, the FTSEurofirst 300 <.FTEU3> index of top
European shares was down 1.3 percent at 854.30 points after
ending 1.7 percent higher on Friday.
                                
 The index has gained about 32.3 percent since reaching a
record low in early March in what market strategists have called
a bear market rally, with corporate earnings surprising on the
positive side, while fundamental macroeconomic data remain dim.
                                
 "There is no significant reason why markets are down but
weekend reports about reduced capital deficits of U.S. banks
mean that financials are losing momentum a bit," said
Giuseppe-Guido Amato, equity strategist at German brokerage Lang
& Schwarz.
                                
 According to a weekend report in the Wall Street Journal,
the Federal Reserve reduced the size of capital deficits facing
several banks before releasing the stress test results.
[ID:nN09480510]
                                
 "It should not come as a surprise that markets are falling
now given the performance in recent weeks," Amato said, adding
that profit taking could also weigh on some stocks.
                                
 HSBC fell 4.2 percent, although the company said it is
well-positioned to ride out economic uncertainty ahead
[ID:nWLA3777]. Deutsche Bank <DBGKn.DE>, Commerzbank <CBKG.DE>
and Royal Bank of Scotland <RBS.L> were down 1.4-8 percent.
                                
 The DJ STOXX Banks Index <.SX7P> has recovered 109 percent
since reaching a floor on March 9.
                                
 
                                
 RALLY UNTIL JUNE?
                                
 Car stocks were the top sectoral loser, with the DJ STOXX
Auto Index <.SXAP> down 2.7 percent. Porsche <PSHG_p.DE>, Fiat
<FIA.MI>, Daimler <DAIGn.DE>, Volkswagen <VOWG.DE> and BMW
<BMWG.DE> were all down 1.6 to 3.1 percent.
                                
 The merger between Volkswagen and Porsche should be
structured through a public limited company that would then
govern the new combination, the works council head of VW said.
[ID:nL9489099]
                                
 On the positive side, AstraZeneca <AZN.L> rose 5 percent
after the company's experimental heart drug Brilinta proved to
be better than Sanofi-Aventis SA <SASY.PA> and Bristol-Myers
SquibbCo's <BMY.N> blockbuster Plavix in a pivotal clinical
trial. [ID:nLB630992]
                                
 Sanofi-Aventis was down 1.6 percent.
                                
 "Fundamentally, sentiment remains positive and there is a
posibility that we will see gains until the end of June," said
Amato.
                                
 Roger Peeters, strategist at Close Brothers Seydler, also
said that there are "good chances for a further positive
development but the big picture still sounds a note of caution".
                                
 Across Europe, the FTSE 100 <.FTSE> index was down 1
percent, Germany's DAX <.GDAXI> was down 1.4 percent and
France's CAC 40 <.FCHI> was down 1.5 percent.
                                
 (Editing by David Cowell)