European shares fall on growth worries; banks slip

                                
 * FTSEurofirst 300 index down 0.6 percent
                                
 * Unexpected contraction in Q4 UK GDP hurts confidence 
                                
 * Spanish banks hit by capital worries
                                
 
                                
 By Harpreet Bhal 
                                
 LONDON, Jan 25 (Reuters) - European shares fell on Tuesday,
as confidence in Britain was shaken by an unexpected drop in
fourth-quarter UK growth figures and with Spanish banks down on
concerns new capital requirement rules may not be tough enough.
                                
 Britain's economy unexpectedly shrank 0.5 percent in the
last three months of last year, the first quarterly drop since
the third quarter in 2009, prompting warnings of a grim 2011 as
the government embarks on the deep spending cuts.[ID:nLDE70O19B]
                                
 The pan-European FTSEurofirst 300 <.FTEU3> index of top
shares closed 0.6 percent lower at 1,144.14 points.
                                
 "Everyone is on the back foot given the GDP numbers earlier,
which has certainly capped any upside for the market. There
doesn't seem to be much in the way of fresh buyers around which
begs the question where is the new wave of buying going to come
from," said Manoj Ladwa, senior trader at ETX Capital.
                                
 British retailers were among the worst hit by the
disappointing growth figures, with Marks & Spencer <MKS.L>, Next
<NXT.L> and Kingfisher <KGF.L> down 0.9 to 3.1 percent.
                                
 Encouraging macroeconomic data from the United States,
however, helped limit further losses on the index, as figures
showed consumer confidence rose more than expected in January to
its highest level in eight months. 
                                
 Across Europe, Britain's FTSE 100 <.FTSE> shed 0.4 percent,
while Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> lost
0.1 and 0.3 percent respectively.
                                
 
                                
 CAPITAL RATIO WORRIES
                                
 Spanish banks were under pressure after Spain's Economy
Minister Elena Salgado said late on Monday that the country's
savings banks have to boost core capital ratios to a minimum of
8 percent by September or the state will partially take them
over. [ID:nLDE70N1M0]
                                
 Banco Santander <SAN.MC> and BBVA <BBVA.MC> underperformed
the wider banking sector by falling 3.1 and 2.9 percent on
concerns the new capital requirements ratios may not be tough
enough to build confidence in the sector. 
                                
 "There has been quite a bit of optimism around the European
crisis over the past few days, but there is still a great deal
of concern over the Spanish cajas. If they can't find the
funding, this will have a dire effect on the rest of Europe,"
said Angus Campbell, head of sales at Capital Spreads.
                                
 Offering some relief from the gloom over the debt crisis in
the euro zone, the European Financial Stability Facility (EFSF)
drew extremely high demand for its debut issue of five-year debt
to fund Ireland's bailout, with order books worth over eight
times the amount on offer. [ID:nBRU011276] 
                                
 Among individual movers, French chip maker
STMicroelectronics <STM.PA> lost 4.5 percent as disappointing
performance of its joint venture with Ericsson <ERICb.ST> and a
downbeat outlook for revenue in 2011 weighed on the stock,
despite posting better-than-expected fourth-quarter results.
                                
 Ericsson, however, gained 2.5 percent after fourth-quarter
sales surged and the company forecast strong demand for mobile
broadband equipment in 2011. [ID:nLDE70O06S]
 (Additional reporting by Joanne Frearson; Editing by Hans
Peters)