* FTSEurofirst 300 falls 1.9 pct, hits 2-week closing low
* Banks among top decliners on concerns over U.S. bill
* Technical picture bearish, more sell-offs likely
By Atul Prakash
LONDON, June 24 (Reuters) - European shares hit a two-week
closing low in choppy trade on Thursday, with banks among the
top decliners on heightened concerns over a U.S. financial
reform bill and worries over the global economic recovery.
The sell-off accelerated in the afternoon session when the
index fell below a key support level. Investor appetite for
risky assets drastically fell, with the VDAX-NEW volatility
index <.V1XI> hitting a two-week high. The higher the index, the
lower the market's desire to take risk.
The FTSEurofirst 300 <> index of top European shares
ended down 1.9 percent at 1,020.33 points -- the lowest close
since June 11. It fell for a third straight session, after
rising for nine sessions in a row to a seven-week high.
Banks were the hardest hit, with the STOXX Europe 600
banking index <.SX7P> falling 3.2 percent, as the proposed U.S.
financial reform bill appeared likely to retain tough
restrictions on banks' trading and investment activities that
could crimp profits. []
Barclays <BARC.L>, Lloyds <LLOY.L>, BNP Paribas <BNPP.PA>
and Societe Generale <SOGN.PA> fell 4.1 to 5 percent.
Worries about the eurozone's debt problems persisted and the
cost of protecting Greek government debt against default rose to
a record high. Greece's securities regulator extended a
short-selling ban on shares on the Athens bourse until Aug 31.
"Tension in the eurozone still persists, with the CDS of
various countries hitting new highs. Conditions in equity
markets probably will remain shaky as we have no clarity on the
further economic outlook," said Gerhard Schwarz, head of global
equity strategy at UniCredit in Munich.
"For now, the market is still preoccupied with the
uncertainty over the outlook for the second half and that was
illustrated by the reaction to the Fed statement where there was
a more cautious assessment on the growth outlook going forward."
The U.S. Federal Reserve scaled back its assessment of the
pace of the nation's economic recovery on Thursday, taking note
of pockets of weakness. It also issued a cautionary note about
volatile financial markets in the light of Europe's debt woes.
A Reuters poll showed the world's major stock indexes should
trade higher a year from now, but fears of a slowing economic
recovery might permit only modest gains in some rich-world
markets. For poll data, click on <EQUITYPOLL1>
Against expectations of previous quarterly Reuters polls,
most stock markets from both the rich world and emerging markets
are on course to finish the first half of 2010 in the red.
BLEAK TECHNICAL OUTLOOK
Technical charts pointed to further declines in European
stocks in the near- to medium-term.
"With all indices, they have seen a counter-trend rally
since late-May and most of them have stalled at a 50-percent
Fibonacci retracement," said Nicole Elliot, technical analyst at
Mizuho, referring to 1,027 points -- the 50 percent retracement
of FTSEurofirst 300's fall from mid-April to late May.
"The moving averages have turned to a sell -- the 50-day
moving average and the 200-day moving average suggest you should
be short of this index. I would recommend that people look to
sell right now for a drop back down to 965 points," she said.
The 14-day, the 50-day and the 200-day moving averages and
the 50-percent Fibonacci retracement -- all hovered around the
1,026-1,027 area on Thursday.
Charts showed that the index was forming a head and
shoulder's top, where the head was at a high of 1,115 reached in
April, the left shoulder was at 1,074 touched in January and the
right shoulder was at 1,061 -- a high in June.
"That's an interim top and we are going to trade lower,"
Elliot said.
Miners were pressured by a shaky demand outlook for metals,
offsetting optimism after Australia appointed a new prime
minister, Julia Gillard, who offered to end a dispute over a
controversial "super profits" mining tax, which is threatening
$20 billion worth of investment in the sector.
ENRC <ENRC.L>, Xstrata <XTA.L> and Rio Tinto <RIO.L> shed
3.2 to 4.4 percent.
(Editing by Erica Billingham)
