* FTSEurofirst 300 down 1.1 pct; lowest closing level for yr
* Peripheral banks pressured by Moody's downgrade of Spain
* Major index briefly breaches key support level
By Harpreet Bhal
LONDON, March 10 (Reuters) - European shares fell to their
lowest closing level so far this year on Thursday, on sovereign
debt and economic recovery concerns.
The pan-European FTSEurofirst 300 <> index of top
shares closed 1.1 percent lower at 1,131.78 points.
In a sign there could be worse to come, the euro zone's blue
chip Euro STOXX 50 index <> briefly broke through a
major resistance point -- the 38.2 percent Fibonacci retracement
of the rally from its November low to February high at 2,908.76
points -- before closing a touch above the level at 2,909.73
points.
Growing worries about the euro zone debt crisis rattled the
market after Moody's Investors Service cut Spain's sovereign
debt rating one notch and warned of further downgrades,
estimating that restructuring savings banks would cost more than
twice the government's 20-billion-euro forecast.
Spanish banks BBVA <BBVA.MC> and Santander <SAN.MC> shed 1.7
percent and 1.4 percent, respectively, dragging the wider
Spanish market <> down 1.2 percent.
Spain's rating downgrade puts additional pressure on euro
zone leaders, who meet for a two-day summit on Friday, to come
up with a sustainable solution to the region's debt crisis.
Friday's summit, however, is only likely to lay the ground
for a meeting of all 27 EU leaders in Brussels on March 24-25,
when they hope to agree on a "comprehensive package" of measures
aimed at drawing a line under the crisis. []
"The market is hoping that the European Financial Stability
Fund will be increased in size and that they (European Union
leaders) will agree to start buying bonds. That might bring some
relief to the market," said Andrea Williams, who manages 1.2
billion pounds in assets for Royal London Asset Management.
Thomson Reuters Peripheral Eurozone Countries Index
<.TRXFLDPIPU> fell 1.8 percent, reflecting a broad-based
sell-off in peripheral equities, but Williams said value could
be found in companies deriving earnings from outside the region.
"We have BBVA and Santander, because a lot of their business
is overseas in places like Latin America, which is still growing
quite nicely," Williams said.
"We'd feel more comfortable with Italy over Spain because
they haven't had the fiscal restrictions that were needed to
sort the economy out."
JOBLESS WOES
Sentiment was also hit by concerns over the pace of recovery
in the U.S. labour market after weekly jobless claims exceeded
expectations. []
"The S&P 500 ... has now dipped below the psychological
1,300 level. Panic is widespread as there is a worry that the
correction cometh," said Will Hedden, sales trader at IG Index.
Other heavy fallers in Europe included miners, with the
STOXX Europe 600 basic resources index <.SXPP> down 3.2 percent,
as weak Chinese import data casted doubt on demand for metals
after the country posted its largest trade deficit in seven
years.
Europe's STOXX 600 index <> currently trades at 10.8
times expected earnings, below a 10-year average of 13.6,
according to Thomson Reuters Datastream.
Richard Greenwood, fund manager at Bedlam Asset Management,
which manages $700 million, said the market was witnessing a
rotation into developed markets from emerging markets.
"A lot of developed market stocks have big emerging market
businesses, which we are picking up at better valuations at the
moment," Greenwood said.
(Additional reporting by Atul Prakash; Editing by Will
Waterman)
