Banks, commods drag European shares sharply lower

                                
 * FTSEurofirst 300 index falls 2 pct
                                
 * Banks, commods slip on global recovery concerns
* For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Joanne Frearson
                                
 LONDON, Aug 17 (Reuters) - European shares fell in early
trade on Monday, retreating for a second day with banks and
commodities the main fallers as investors became cautious on
global recovery hopes.
                                
 By 0847 GMT, the FTSEurofirst 300 <.FTEU3> index of top
European shares was down 2 percent at 922.63 points, having
earlier fallen to 920.75 points. The index was on track to post
its biggest one-day percentage drop since July 2.
                                
 In Asia, Chinese stocks <.SSEC> slid 5.8 percent, while
Japan's Nikkei average <.N225> shed 3.1 percent.
                                
 "There is now a realisation that coming out of a recession
is one thing, but building a recovery is another," said Justin
Urquhart Stewart, director at Seven Investment Management.
                                
 "We are now down to how companies are going to grow. The
growth we have seen out of Japan as well as Europe looks like it
has been primarily based on government stimulation... the
question is, is this sustainable?" he said.
                                
 Banks took the most points off the European index, with HSBC
<HSBA.L>, UBS <UBSN.VX>, Credit Suisse <CSGN.VX>, Barclays
<BARC.L> and Banco Santander <SAN.MC> down 2.2 to 3.2 percent.
                                
 Miners were in the doldrums as metal prices retreated on
demand concerns, with Anglo American <AAL.L>, Antofagasta
<ANTO.L>, BHP Billiton <BLT.L>, Rio Tinto <RIO.L> and Xstrata
<XTA.L> losing 3.3 to 4.3 percent.
                                
 Fresnillo <FRES.L> was 2.1 percent lower after it posted a
14 percent decline in first-half attributable net profit, but
the firm was upbeat about the remainder of the year.
                                
 
                                
 OILS RETREAT
                                
 Energy stocks were also lower as crude <CLc1> slipped below
$67 a barrel. BG Group <BG.L>, BP <BP.L>, Royal Dutch Shell
<RDSa.L> and Total <TOTF.PA> were down 1.5 to 2.5 percent.
                                
 On the upside, Dutch biotech firm Crucell <CRCL.AS> was 3.4
percent higher after the company won key vaccine contracts.
                                
 Nobel Biocare <NOBN.VX> gained 2.6 percent after Banc of
America-Merrill Lynch added the company to its "Europe 1 list".
                                
 Across Europe, the FTSE 100 <.FTSE> index was down 1.5
percent, Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> were
down 1.7 percent.
                                
 On the macro front, data showed Japan's economy returned to
growth in the second quarter, ending its longest recession since
World War Two, but analysts warned of a rocky road ahead as the
nascent recovery was based on short-term stimulus efforts around
the world. [ID:nLH338906]
                                
 Later in the session investors may focus on the Empire State
Manufacturing Survey for August released at 1230 GMT. Economists
in a Reuters survey expect a reading of 2.50 compared with
-0.55 in July.
                                
 The U.S. National Association of Home Builders/Wells Fargo
August housing market index is out at 1700 GMT. Economists in a
Reuters survey expect a rise to 18 compared with 17 in July.
                                
 U.S. stock index futures <SPc1> <DJc1> <NDc1> lost 1.7 to
1.9 percent, pointing to a weaker start on Wall Street.
                                
 The FTSEurofirst 300 <.FTEU3> index, which is up nearly 11
percent year-to-date, has risen 43 percent since reaching a
floor in early March.
 (Editing by Hans Peters)