* FTSEurofirst 300 down 3 pct
* ECB cuts rates by 0.5 percent
* Bank of England slashes interest rates by 1.5 percent
* Banks, commodity stocks weigh
By Sarah Marsh
FRANKFURT, Nov 6 (Reuters) - European shares traded lower in
the early afternoon on Thursday, extending losses after a widely
expected European Central rate cut failed to offset worries
about a weakening economic outlook.
By 1314 GMT, the FTSEurofirst 300 <> index of top
European shares was down 3 percent at 924.28 points, following
the ECB decision to cut interest rates by 50 basis points to
3.25 percent.
The index had hit low of 911.3 points early in the session,
but had pared back losses after a hefty Bank of England rate
cut.
"It is clear the markets would react to a 50 basis point cut
by the ECB negatively because, in the end, it was fully priced
in," said FrankfurtFinanz analyst Heino Ruland.
"There were a lot of people hoping for a cut of 75 points
because the economy is contracting in a way I haven't ever
seen."
The Bank of England at midday slashed rates by 1.5
percentage points to 3 percent. Most economists polled by
Reuters had forecast a half-point BoE cut although several had
changed their forecasts following a series of gloomy data.
"In the wake of England's interest rate cut, there was
probably at least one or the other investor who had speculated
on a bigger cut in ECB rates," said Giuseppe-Guido Amato,
investment analyst at Lang & Schwarz.
Britain's central bank has never cut interest rates by more
than half a point since it was made independent in 1997.
"This decision is unprecedented and the market is going to
be confused for a time by it," said Jim Wood-Smith, head of
research at Williams de Broe.
"On the one hand it is good news; on the other hand it is
confirmation that we are up a gum tree."
Banks were the biggest losers on the index. HSBC <HSBA.L>,
BNP Paribas <BNPP.PA>, UBS <UBSN.VX> and Banco Santander
<SAN.MC> were down 4.3-8.2 percent.
Elsewhere in financials, the world's biggest listed hedge
fund firm Man Group <EMG.L> lost 35.8 percent after it said its
pre-tax profit fell 24 percent to $622 million in the six months
to end-September. []
AXA <AXAF.PA>, Europe's biggest insurer by market
capitalisation, dropped 6.7 percent after it reported lower
9-month sales. []
Across Europe, the FTSE 100 index was down 3.3 percent,
Germany's DAX was 4.4 percent and France's CAC 40 was 3.7
percent lower.
COMMODITIES FALL, DEFENSIVES RETURN
Energy stocks also contributed to heavy losses on the index
as crude <CLc1> fell 2.9 percent as the dollar strengthened and
dismal economic data pointed to a deeper U.S recession than
feared.
BG Group <BG.L>, BP <BP.L>, Royal Dutch Shell <RDSb.L> and
Total <TOTF.PA> were down 1.4-3.2 percent.
A retreat in metal prices also weighed on mining shares with
with copper <MCU3=LX> down 3.4 percent.
Vedanta Resources <VED.L> slipped 9.7 percent after the
group posted a 24.7 percent drop in first half profit.
[]
Rio Tinto <RIO.L>, BHP Billiton <BLT.L> and Xstrata <XTA.L>
were between 9.2-9.7 percent lower.
On the upside, brewer InBev <INTB.BR> gained 0.9 percent as
it insisted its $52 billion takeover of Anheuser-Busch <BUD.N>
was on track after third-quarter results slightly exceeded
expectations despite rocketing costs. []
Investors also turned to defensive stocks considered a safe
bet in times of economic turmoil, with the pharmaceutical sector
regaining some of the ground which it lost on Wednesday.
Roche <ROG.VX> and Novartis <NOVN.VX> were both up around
1.4 percent.
(Additional reporting by Tyler Sitte and Joanne Frearson;
Editing by Hans Peters)
