* FTSEurofirst 300 slips further from an 11-month high
* Miners and banks lead fallers, drugmakers in favour
* For up-to-the-minute market news, click on []
By Dominic Lau
LONDON, Sept 21 (Reuters) - European shares fell early on
Monday, with the main FTSEurofirst 300 index dipping below the
1,000 mark and further slipping from an 11-month high on worries
the market may have sped ahead of economic fundamentals.
Miners and banks were among the main losers, but defensive
drugmakers were in demand, lending support to the market.
By 0819 GMT, the FTSEurofirst 300 <> of top European
shares was down 0.8 percent at 998.07 points. The index rose
above the 1,000 level on Wednesday after an 11-month gap and hit
a year high of 1,013.63 a day later. But it closed down 0.5
percent on Friday.
"The market might look slightly overbought near term, but
the economy is definitely improving, corporate profits are
definitely improving, interest rates are staying low and
valuations aren't expensive. We are still quite bullish," said
Nick Nelson, European equity strategist at UBS.
The index has rallied 54.6 percent since hitting a floor in
March and is up 17.4 percent this quarter, on track to post its
best quarterly rise in almost a decade.
Miners fell, with traders citing weaker gold prices <XAU=>,
which dropped below $1,000 an ounce for the first time in almost
a week. Other precious metal prices were also softer.
Rio Tinto <RIO.L>, Anglo American <AAL.L>, Xstrata <XTA.L>,
Vedanta Resources <VED.L> and Kazakhmys <KAZ.L> were down
1.7-2.9 percent.
BHP Billiton <BLT.L> fell 2.4 percent. A Wall Street Journal
report said BHP Billiton planned to use part of a cash surplus
of around $18 billion to fund a round of acquisitions, possibly
involving some large rivals. []
The banking sector, which has rallied 170 percent since
March, was also out of favour, with HSBC <HSBA.L>, Banco
Santander <SAN.MC>, UBS <UBSN.VX>, Lloyds Banking Group <LLOY.L>
and BBVA <BBVA.MC> down 1-1.8 percent.
Royal Bank of Scotland <RBS.L> was down 2.2 percent. A
source familiar with the situation said the bank was talking to
investors to gauge support for a "modest" equity placement of 3
billion to 4 billion pounds ($4.9 billion-$6.5 billion).
[]
In the pharmaceutical sector, Novartis <NOVN.VX>, Elan
<ELN.I>, Lonza Group <LONN.VX> and UCB <UCB.BR> rose 0.4-4.1
percent.
The VDAX-NEW volatility index <.V1XI>, a gauge of investor
risk appetite, rose 6.7 percent. The higher the volatility
index, the lower investors' appetite for risky assets such as
equities.
Across Europe, Britain's FTSE 100 <> slipped 0.7
percent, Germany's DAX <> fell 1 percent and France's CAC
40 <> eased 0.4 percent.
NOT PRICEY
UBS's Nelson, however, said European equities were not
expensive.
"There is a bubble in some assets. It is more of a bubble in
emerging market equities ... There is probably more of a bubble
in other assets (for example) property," he said.
"Globally, because of very low interest rates, you are going
to see bubbles but equities in Europe, on 13 times next year's
earnings, are not bubble valuations."
Spain's Endesa <ELE.MC> dropped 5.2 percent to top the
FTSEurofirst 300 fallers after UBS downgraded the utility firm
to "sell" from "neutral" while Citigroup cut the stock to "hold"
from "buy".
Among other individual movers, German potash supplier K+S
<SDFG.DE> shed 4.7 percent after Potash Corp of Saskatchewan
<POT.TOP> <POT.N>, the world's biggest fertilizer producer,
lowered its 2009 earnings target on Friday, citing weak sales.
Volkswagen <VOWG.DE>, Europe's largest carmaker, lost 2.6
percent. German industry publication Automobilwoche quoted an
unnamed Japan's Suzuki Motor <7269.T> executive as saying the
German automaker was expected to take a stake in Suzuki by the
end of 2009.
(Editing by Mike Nesbit)
