European shares fall, led by oil, banks, miners

                                
 * FTSEurofirst 300 index down 1.1 percent
                                
 * Economic growth worries weigh on bank and commodity shares
                                
 * Defensives gain; pharma group Roche up 2.3 percent
                                
 By Peter Starck
                                
 FRANKFURT, July 6 (Reuters) - European shares fell for the
third straight session on Monday on renewed worries about the
sustainability of economic recovery foreseen in recent sentiment
surveys on both sides of the Atlantic and in China.
                                
 Oil & gas stocks <.SXEP>, banks <.SX7P> and basic resources
<.SXPP> took the most points off the FTSEurofirst 300 index
<.FTEU3> of top European shares, which fell 1.1 percent to
833.03 points -- its lowest close since May 13.
                                
 Those investors who stayed loyal to equities rotated
positions into traditional safe havens such as pharmaceuticals
<.SXDP>, telecoms <.SXKP> and food and beverages <.SX3P>.
                                
 The benchmark index, which lost as much as 2 percent early
in the European day before Wall Street opened after the long
Independence Day weekend, is up 29 percent from the all-time low
set on March 9.
                                
 That rally was driven primarily by an improvement in
economic sentiment indicators.
                                
 "The market has priced in a lot. Now it remains to be seen
whether things turn out that way," said Joerg Treptow, a trader
at M.M. Warburg.
                                
 Among Europe's oil majors, ENI <ENI.MI> fell 2.7 percent, BP
<BP.L> declined 2.6 percent and Royal Dutch Shell <RDSa.L> lost
2.1 percent as the crude price <CLc1> gave up more than 3.5
percent to trade below $65 a barrel. [ID:nSYD537953]
                                
 Shares in miner Rio Tinto <RIO.L> fell 7 percent and
steelmaker ArcelorMittal <ISPA.AS> dropped 4.7 percent. The DJ
Stoxx basic resources index <.SXPP> shed 5.2 percent.
                                
 Copper <MCU3> fell more than 3 percent to a two-week low as
the dollar strengthened and investors fretted over how long it
would take major economies to overcome recession, allowing
demand to recover. [ID:nL6128364]
                                
 Among financials, ING Group <ING.AS> tumbled 4.5 percent,
Deutsche Bank <DBKGn.DE> fell 3.2 percent, AXA <AXAF.PA> lost 3
percent, UniCredit <CRDI.MI> closed 2.9 percent lower and Royal
Bank of Scotland <RBS.L> also was down 2.9 percent.
                                
 But reinsurer Paris Re <PRI.PA> surged 14.5 percent on news
that Bermuda-based reinsurer PartnerRe <PRE.N> would acquire it
in a $2 billion deal. [ID:nN05206325]
                                
 Pharma group Roche <ROG.VX> gained 2.3 percent, in telecoms
Vodafone <VOD.L> added 1.7 percent, and in the food and
beverages sector British American Tobacco <BATS.L> rose 1.8
percent.
                                
 
                                
 SINKING SENTIMENT
                                
 Investor and analyst sentiment in the euro zone worsened
unexpectedly after showing three months of improvement, data
from the Sentix research group showed. [ID:nBAF001721]
                                
 The world's leading economies, should not presume a global
economic recovery is near, World Bank President Robert Zoellick
said. [ID:nL6421718]
                                
 Interventions by central banks and governments appeared to
have "broken the fall in the global economy" by stabilising
financial markets and boosting demand. "Yet 2009 remains a
dangerous year. Recent gains could be reversed easily, and the
pace of recovery in 2010 is far from certain," Zoellick said.
                                
 Strategists at Goldman Sachs saw attention shifting towards
the durability of any economic growth recovery.
                                
 "The market's attention is likely to continue to shift away
from the focus of the first half of the year -- is the global
economy stabilizing -- towards what is likely to be the focus of
the second half of the year -- how sustainable is any recovery
likely to be?" Goldman Sachs said.
                                
 "Our focus is shifting away from the very intense scrutiny
we have given to the major industrial and inventory indicators
and towards the consumer and other measures of sustainable final
demand," Goldman Sachs said.
                                
 Strategists at Morgan Stanley, who assessed that market
consensus had tended to be consistently two months late this
year, upgraded equities to "neutral" from "underweight".
                                
 "We are not turning outright bullish, as there are still
plenty of uncertainties related to U.S. housing, European
earnings, the European banking system, the default cycle,
Chinese growth, and policy action," Morgan Stanley said.
                                
 "We would consider turning more positive if we get
comfort that the trough in earnings and U.S. house prices is
getting closer," Morgan Stanley said.
                                
 The U.S. quarterly corporate earnings reporting season kicks
off this week with aluminium maker Alcoa <AA.N> on July 8.
[ID:nN0595620]
                                
 "We believe second-quarter U.S. earnings will post a small
positive surprise," JPMorgan said.
                                
 "In contrast to Q1, we do not see the financial sector
driving the reporting season. Positive surprises are more likely
to arise within cyclical sectors with consumer discretionary and
technology our top picks," JPMorgan said.
                                
 "We look for a further 10-20 percent rally in equity markets
as an increasing number of investors are induced into recovery
trades or forced to cover defensive positions," it added.
 (Additional reporting by Brian Gorman and Atul Prakash in
London; Editing by Dan Lalor)