Banks, BP, US sentiment pull European shares lower

                                
 * Deutsche Bank leads banking sector lower after results
                                
 * BP weighs on sector after results
                                
 * Drugmakers, Lagardere lend some support
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Dominic Lau
                                
 LONDON, July 28 (Reuters) - European shares fell on Tuesday
after hitting their highest close for 8-1/2 months in the
previous session, as Deutsche Bank <DBKGn.DE> led banks lower
and BP's <BP.L> results put pressure on energy stocks.
                                
 Weak U.S. consumer confidence also weighed on the market and
overshadowed news that U.S. single-family home prices rose in
May from April, the first monthly rise in nearly three years.
                                
 U.S. consumer confidence fell more than expected in July,
the Conference Board said, recording its second consecutive
decline as sentiment remained hampered by a difficult job
market. [ID:nN28106587]
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
closed down 1 percent at 902.85 points. Volumes on the index
were about 87 percent of the 90-day daily average.
                                
 Banks were among the worst hit. Deutsche Bank <DBKGn.DE>
sank over 11 percent after it raised its loan loss provisions in
the second quarter, overshadowing a nearly 70 percent rise in
net profit driven by its investment banks. [ID:nLS546137]
                                
 BNP Paribas <BNPP.PA>, Credit Suisse <CSGN.VX>, UBS
<UBSN.VX>, Royal Bank of Scotland <RBS.L> and Deutsche Postbank
<DPBGn.DE> lost between 2.8 and 5.5 percent.
                                
 However, BBVA <BBVA.MC> advanced 4.5 percent after reporting
its core capital rose to 7.1 percent in the first half,
supporting the bank's recent declarations that it had no need
for a capital hike.
                                
 "The earnings season seems to be better than analysts'
expectations on an aggregate level. So far it seems to be
because cost cutting has been very effective ... improving
profitability despite declines in sales on top line," said Mark
Bon, a fund manager at Canada Life.
                                
 "There is some expectation that once you have this phase of
cost cutting there is a return of some top line growth from
refilling the inventory pipeline, an increase in sales," he
said, adding that it would be an importance phase for the market
to return to healthy earnings growth though it could be a long
process.
                                
 The FTSEurofirst 300 has gained 40 percent since reaching a
lifetime low in early March, and is up 8.5 percent for the year.
                                
 Oil producers were other standout losers after BP <BP.L>
said it had increased its cost reduction targets for 2009 by 50
percent to $3 billion but reported a halving in second-quarter
profits due to lower oil prices and weaker refining margins.
[ID:nLR694861]
                                
 BP was 3.1 percent lower, while BG Group <BG.L>, Total
<TOTF.PA> and StatoilHydro <STL.OL> lost 2.1-2.8 percent.
                                
 Miners were also weaker, with Xstrata <XTA.L> down 6.5
percent despite posting solid first-half production numbers.
Anglo American <AAL.L>, BHP Billiton <BLT.L>, Rio Tinto <RIO.L>
and Eurasian Natural Resources <ENRC.L> fell 3.1-6.9 percent.
                                
 "There is a little bit of rotation into stocks which lagged
behind and a little bit of profit taking on things that have run
very well recently," Bon said. "It's a good development, as even
stocks that have lagged behind have the chance to be bought as
well."
                                
 Across Europe Britain's FTSE 100 <.FTSE> shed 1.3 percent --
ending a record-equalling 11th-day winning run [ID:nLS674123],
Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> lost 1.5 and
1.2 percent, respectively.
                                
 LAGARDERE, DRUGMAKERS SUPPORT
                                
 Lagardere <LAGA.PA> soared more than 5 percent amid news
that the media group had been provisionally cleared by France's
stock market regulator in a long-running probe into suspected
insider trading at Airbus parent EADS <EAD.PA>.
                                
 EADS, which Lagardere owns 7.5 percent, gained 2.3 percent,
benefiting from solid second-quarter results.
                                
 Defensive drugmakers offered some support, with Novo Nordisk
<NOVOb.CO>, Roche <ROG.VX>, GlaxoSmithKline <GSK.L>, Merck KGaA
<MRCG.DE> and Sanofi-Aventis <SASY.PA> up 0.7-3.1 percent.
                                
 "There is this sentiment in the market about the glass being
half full -- but there is a big gap between the euphoria and
reality, a bit like a supermodel without make-up," said
Commerzbank's chief strategist, Hans-Juergen Delp.
                                
 "Earnings expectations have been lowered so much that they
are easily exceeded."
 (Additional reporting by Joanne Frearson and Christoph Steitz;
Editing by Greg Mahlich)