* FTSEurofirst 300 down 1.3 pct, Euro STOXX 50 loses 1.5 pct
* Sharp pullback in commodities hit resource-related shares
* DAX-NEW volatility rises 5 percent as risk appetite drops
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, Nov 12 (Reuters) - European stocks dropped in early
trade on Friday, losing ground for the third straight session,
hurt by escalating fears over Ireland's debt problems that also
dragged the euro to a six-week low versus the dollar.
At 0909 GMT, the FTSEurofirst 300 <> index of top
European shares was down 1.3 percent to 1,094.69.
The Euro STOXX 50 <>, the euro zone's blue chip
index, dropped 1.5 percent to 2,787.54, running into strong
support as it neared its 200-day moving average around 2,760.
European Union leaders sought to ease concerns about
Ireland's ability to pay its debt on Friday. They said at a
Group of 20 leaders' summit in Seoul that if any EU state's debt
were to be restructured, investors would not be forced to take a
writedown on the value of bondholdings. []
"The CDS market has been sending warning signals on Ireland
for a while, but the contagion to stocks has taken some time.
Here it is now," Louis Capital Market analyst Jacques Henry
said.
"There has been an excess of optimism in equities lately and
the market was ripe for a correction. But, all in all, recent
data shows inflows into the asset class have been brisk and the
pullback will be seen as a good opportunity to buy."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Ireland's bailout challenge http://r.reuters.com/wuv48p
European bank exposure to Irish debt: []
Graph on euro zone struggle with debt:
http://r.reuters.com/hyb65p
G20 Take a Look: []
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Ireland's ISEQ <.ISEQ>, Italy's FTSE MIB <.FTMIB>,
Portugal's PSI20 <> and Spain's IBEX 35 <> dropped
0.7-1.1 percent, while the Thomson Reuters Peripheral Eurozone
Countries Index <.TRXFLDPIPU> fell 1 percent to a six-week low.
That compared with two-year highs earlier this week by the
FTSEurofirst 300, Britain's FTSE 100 <> and Germany's DAX
<>.
The VDAX-NEW volatility index <.V1XI>, Europe's main fear
gauge, rose 5 percent on Friday, highlighting a drop in investor
appetite for risk.
Banking stocks featured among the top losers, with Bank of
Ireland <BKIR.I> down 4.2 percent, Dexia <DEXI.BR> down 2.3
percent, and Deutsche Bank <DBKGn.DE> down 2 percent.
"The knives will be out for any bank with exposure in the
Emerald Isle as it is difficult to imagine that much in the way
of central bank sympathy will be extended to such institutions,"
Simon Denham, head of Capital Spreads, said in a note.
Europe's STOXX banking index <.SX7P>, down 5 percent in a
week, is down 7.7 percent so far this year to be Europe's second
worst sector performance, after utilities <.SX6P>.
Mining stocks also took a beating on Friday as talk of a
possible Chinese interest rate hike spurred profit taking in
commodity prices.
Xstrata <XTA.L> was down 4.3 percent and Anglo American
<AAL.L> down 4 percent. Despite Friday's 3.7 percent pullback,
the STOXX basic resources index <.SXPP> was still up 17 percent
in 2010.
Investors were also digesting the outcome of the G20 meeting
at which leaders agreed to indicative guidelines on global
imbalances and left the detail to be discussed next year.
[]
(Editing by Dan Lalor)
