* FTSEurofirst 300 down 0.4 percent
* British economy unexpectedly shrank in fourth quarter
* Spanish banks fall after strong run
* Siemens gains as results beat forecasts
* For up-to-the-minute market news, click on []
By Brian Gorman
LONDON, Jan 25 (Reuters) - European shares fell on Tuesday,
after Britain's economy unexpectedly shrank in the fourth
quarter and Spanish banks retreated after a recent strong run.
At 1012 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.4 percent at 1,146.97 points, after
rising 1 percent over the previous two sessions.
Britain's economy suffered a shock 0.5 percent contraction
in the last three months of 2010 after December's heavy snow
took a far harsher toll than economists had forecast, official
data showed on Tuesday. []
It was "a disappointing set of numbers and should dash any
threat of a rise in interest rates in the near future," said
Azad Zangana, European Economist at Schroders.
UK banks Lloyds <LLOY.L> and Royal Bank of Scotland <RBS.L>
fell 2.9 and 2.3 percent respectively.
Spanish bank shares fall sharply, led by a 5 percent drop in
Bankinter <BKT.MC>, as investors questioned whether new core
capital requirements for banks were tough enough to restore
confidence in the ailing financial sector.
Among the heavyweights, Banco Santander <SAN.MC> and BBVA
<BBVA.MC> were down 3 and 3.1 percent respectively. Both had
risen in recent days after Spain said it planned a partial state
takeover of its weakest savings banks as it seeks to reassure
investors a rescue will not weigh on its deficit.
Spain's banks will not need more than 20 billion euros
($27.31 billion) in fresh capital, Economy Minister Elena
Salgado said on Monday.
"Everybody knows Spain has problems - the 20 billion number
does not sound enough. If we get another number, that is
credible, people will say it is a relief," said Isherwood.
The effective size of Europe's financial rescue fund should
be increased and its banks need rigorous stress-testing to help
restore market confidence, the IMF said in a report released on
Tuesday. []
Across Europe, Britain's FTSE 100 <> fell 0.6 percent,
Germany's DAX <> fell 0.1 percent and France's CAC40
<> fell 0.3 percent.
But strategists remained upbeat on the prospects for
equities.
"I would not put too much emphasis on it (UK GDP)," said
Philip Isherwood , European equities strategist at Evolution
Securities. "The hope would be that earnings will drive the
market more than the wider macro stuff."
SIEMENS RISES
Some companies bucked the trend, supported by strong
results. Siemens AG <SIEGn.DE>, Europe's biggest engineering
conglomerate, rose 1.4 percent after posting
better-than-expected earnings in its first quarter, helped by
robust demand from rapidly growing emerging economies.
[]
Ericsson <ERICb.ST>, the world's biggest mobile network gear
maker, rose 3.4 percent after seeing a surge in equipment sales
in the fourth quarter, although the Swedish group's profit
margin was weaker than expected.
Shares in chipmaker STMicroelectronics <STM.PA> fell 3.9
percent after fourth-quarter results beat expectations, but a
disappointing performance of its joint venture with Ericsson
weighed on the stock.
(Editing by Erica Billingham)
