* FTSEurofirst 300 index closes 3 pct lower
* Fears of sovereign debt contagian pressure banks
* Miners hurt by Australian mining tax
By Harpreet Bhal
LONDON, May 4 (Reuters) - European shares sank to a
two-month closing low on Tuesday, as investors' confidence was
rattled by growing concerns that Greece's massive bailout may
not prevent a wider euro zone debt crisis.
The FTSEurofirst 300 <> index of leading European
shares closed 3 percent lower at 1,033.18 points, its lowest
closing level since early March, and crossed into negative
territory for the year, down 1.2 percent.
The index, which rose nearly 26 percent in 2009, has come
under pressure in the last two months as investors fretted over
the fiscal health of euro zone states. A 110 billion euro
($146.5 billion) European Union/International Monetary Fund
bailout for Greece has so far offered little relief to calm
concern about a possible contagion.
Banks were among the biggest fallers, with Barclays
<BARC.L>, HSBC <HSBA.L>, Societe Generale <SOGN.PA>, BNP Paribas
<BNPP.PA> and Deutsche Bank <DBKGn.DE> down 1.9 to 6.1 percent.
Spanish lenders Banco Santander <SAN.MC> and BBVA <BBVA.MC>
tumbled 7.1 and 7.6 percent respectively, while Greek bank
stocks <.FTATBNK> fell 10.3 percent.
The euro tumbled to a one-year low below $1.31 and the risk
premium on Greek, Portuguese and Spanish bonds soared
<GR10YT=TWEB> <PT10YT=TWEB> <ES10YT=TWEB>.
Investors were uncertain about Athens' ability to push
through ambitious budget cuts, promised in exchange for aid, as
unions stage strikes and shut down tax offices, government
ministries, schools and hospitals. []
"The agreement with Greece in principle is good but it is
going to impose a huge amount of hardship and it is not clear
whether it will actually contain the contagion which has been
spreading as a result," said Mike Lenhoff, chief strategist at
Brewin Dolphin.
Adding to the concern, German Economy Minister Rainer
Bruederle said the international bailout package agreed for
Greece is not intended to cover the country's entire financial
requirements for the next three years []
In an effort to calm some worries, Spanish Prime Minister
Jose Luis Rodriguez Zapatero dismissed as "complete madness" a
market rumour that the country would soon ask for 280 billion
euros in aid from the euro zone. []
Across Europe, the FTSE 100 <> index was down 2.6
percent, Germany's DAX <> slipped 2.6 percent and France's
CAC 40 <> fell 3.6 percent.
Spain's IBEX <>, Portugal's PSI 20 <> and
Greece's stock market <> tumbled 4.2 to 6.7 percent.
SPILL HAUNTS BP
Energy stocks lost ground, with BP <BP.L> down 3 percent as
investors fretted over the cost of the company's battle against
a giant oil slick off the southern coast of the United States.
BP has fallen around 17 percent since it reported two weeks
ago a fire on the Deepwater Horizon drilling rig, which
subsequently sank, unleashing a massive oil flow into the sea.
Miners were under pressure, hurt by the Australian
government's decision to impose a new 40 percent mining tax.
Eurasian Natural resources <ENRC.L>, Kazakhmys <KAZ.L>, BHP
Billiton <BLT.L>, Xstrata <XTA.L> and Rio Tinto <RIO.L> fell 6.4
to 11.3 percent.
Among individual movers, Inmarsat <ISA.L> gained 2.2
percent, with traders citing renewed talk of a bid interest from
stake holder Harbinger.
Defensive issues gave some support to the index, benefitting
from a perceived safe-bet appeal. British American Tobacco
<BATS.L> rose 1.9 percent, while drugmakers GlaxoSmithKline
<GSK.L> and AstraZeneca <AZN.L> added 0.3 and 0.7 percent
respectively.
($1=.7508 Euro)
(Editing by Erica Billingham)
