* FTSEurofirst 300 falls 2.8 pct after two-day rally
* Banks slip, recession fears back in spotlight
* Commodity stocks track weaker metals, oil prices
By Atul Prakash
LONDON, Oct 15 (Reuters) - European shares headed lower on
Wednesday to break a two-day winning streak as the euphoria over
bold government action to arrest a financial sector meltdown
dissipated and recession fears took centre stage.
At 0855 GMT, the FTSEurofirst 300 index <> of top
European companies was down 2.8 percent at 939.10 points, after
gaining a record 10 percent on Monday and 3 percent on Tuesday.
On Wednesday, banks were the top weighted sectoral losers,
with Standard Chartered falling 6.6 percent, Societe Generale
shedding 3 percent, HSBC down 3.2 percent and UBS <UBSN.VX> down
4 percent.
KBC <KBC.BR> fell 13.7 percent. The Belgian banking and
insurance group said it expected a third-quarter loss of up to
930 million euros ($1.3 billion) after Moody's cut the credit
ratings on a number of structured investment products that KBC
had invested in.
Recession fears returned after trillions of dollars pledged
for bank bailouts from Europe to Asia helped allay fears of an
imminent financial meltdown.
"After the colossal gains achieved at the start of this
week, it would seem that the hangover has kicked in and
investors have sobered to the reality that recession is here,"
said Andrew Turnbull, senior sales manager at ODL Securities.
EU leaders meet in Brussels just days after stumping up 2.2
trillion euros ($3 trillion) to rescue European banks and jolt
frozen money markets -- at the heart of worst financial crisis
since the Great Depression -- into life.
European leaders will press for an overhaul of the world's
financial structures after Asia joined western bastions of
capitalism in bailing out banks to avert a financial meltdown.
Southeast Asian nations backed by Japan, South Korea, China
and the World Bank were the latest to join the global rescue
effort, agreeing on Wednesday to create a multi-billion fund to
buy bad debt and help banks. []
The United States on Tuesday offered to take $250 billion
worth of stakes in nine top banks.
But concerns remained that the rescue would come at a huge
economic cost and do little to repair the damage already done by
a 14-month credit crunch, which has slowed the economy.
COMMODITIES STOCKS SLIP
Commodity shares also fell, tracking losses in metals and
crude oil prices.
Oil fell 1.3 percent to trade below $78 a barrel, a far cry
from all-time highs of around $147 hit earlier this year. BP
<BP.L>, Royal Dutch Shell <RDSa.L>, gas producer BG Group <BG.L>
and Tullow Oil <TLW.L> shed between 0.1 and 5.9 percent.
Weaker metals prices dragged down mining shares, with BHP
Billiton <BLT.L>, Anglo American <AAL.L>, Lonmin <LMI.L>,
Kazakhmys <KAZ.L>, Xstrata <XTA.L> and Antofagasta <ANTO.L>
falling between 2.6 and 13 percent.
Global miner Rio Tinto fell 9.2 percent. It warned of
slowing Chinese demand for commodities because of the world
financial crisis and signalled a possible delay in plans to sell
$10 billion in assets.
Indian mining company Sterlite Industries, a unit of Vedanta
Resources, said it will not be able to close a $2.6 billion deal
to buy U.S. copper miner Asarco out of bankruptcy, due to
troubles in the credit markets, an Asarco attorney said.
Vedanta shares were down 11 percent.
Britain's FTSE <> was down 2.7 percent, Germany's DAX
<> fell 2 percent and France's CAC <> slipped 2.2
percent.
The FTSEurofirst 300 index plummeted 22 percent last week --
its worst weekly performance ever, and is down nearly 37 percent
so far this year.
(Reporting by Atul Prakash; Editing by Paul Bolding)
