Europe shares fall; Barclays, HSBC lead banks lower

                                
 * FTSEurofirst 300 index down 0.9 pct
                                
 * Barclays raises $12 bln, stock down
                                
 * Oils down as crude slips; BT dives after warning
                                
 
                                
 By Tyler Sitte
                                
 FRANKFURT, Oct 31 (Reuters) - European stocks fell in
midmorning trade on Friday, snapping a three-day rally, as HSBC
<HSBA.L> and Barclays <BARC.L> led banks lower, while BT Group
<BT.L> dived after warning it would miss earnings forecasts.
                                
 At 1122 GMT, the FTSEurofirst 300 <.FTEU3> index of leading
European companies was down 0.9 percent at 895.82 points after
gaining 0.7 percent in the previous session. The index is down
nearly 16 percent in October, on course for its worst month on
record.
                                
 Barclays slumped 9.1 percent after the British bank said it
is raising $12.1 billion from investors from Qatar, Abu Dhabi
and elsewhere to allow it to avoid taking UK government rescue
cash, while HSBC <HSBA.L> sank 7.3 percent after Goldman Sachs
downgraded the stock to "sell" from "neutral".
                                
 "The road ahead still looks long and steep. A relatively
deep global recession could require further capital raising,
with banks on this occasion going into a downturn in relatively
poor shape," said Keith Bowman, equity analyst at Hargreaves
Lansdown in London.
                                
 "For now, market consensus opinion denotes a weak hold."
                                
 Japan's Nikkei average <.N225> closed 5 percent lower
despite the Bank of Japan trimming its key interest rate to 0.3
percent from a decade-high 0.5 percent.
                                
 
                                
 BT DIVES
                                
 The telecoms sector was another standout loser, led by
Britain's BT, which plunged 24 percent after the company said it
would miss earnings forecasts for its second quarter due to a
poor performance at its Global Services unit.
                                
 Within the sector, Cable & Wireless <CW.L> slipped 2.8
percent and France Telecom <FTE.PA> lost 2.6 percent.
                                
 Weaker crude prices <CLc1> hurt the oil and gas sector, with
Total <TOTF.PA> easing 0.9 percent and Royal Dutch Shell
<RDSa.AS> dipping 0.6 percent.
                                
 Auto shares were once again propped up by Volkswagen
<VOWG.DE>, which bucked the downward trend, adding 7.6 percent.
                                
 Renault <RENA.PA>, however, fell 5 percent, making it the
biggest loser in the European autos sector <.SXAP>, after its 44
percent subsidiary Nissan Motor Co <7201.T> said it was
undecided on its dividend payout after a near 48 pct fall in
first-half operating profit.
                                
 Drugmakers were in demand for their defensive quality, with
GlaxoSmithKline <GSK.L> adding 2.9 percent, Roche <ROG.VX> up
3.7 percent and Novartis <NOVN.VX> putting on 1.1 percent.
                                
 Also on the upside, German chemicals group BASF <BASF.DE>
advanced 4.9 percent.
                                
 The FTSEurofirst 300 has fallen more than 40 percent in
2008, battered by the global credit crisis and the resulting
economic slowdown.
 Across Europe, Britain's FTSE 100 <.FTSE> dropped 1.8
percent, France's CAC-40 <.FCHI> lost 1.9 percent and Germany's
DAX <.GDAXI> was down 0.2 percent.
                                
 Investors will keep an eye on a slew of U.S. economic data
later in the day, including the Reuters/University of Michigan
consumer sentiment survey, a key gauge of consumer inflation and
the Chicago PMI survey which tracks Midwest business activity.
 (Additional reporting by Atul Prakash in London; Editing by
Quentin Bryar)