* 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)