* FTSEurofirst 300 down 1.7 pct; hits seven-week low
* Banks slip on Greek, Portuguese debt downgrades
* Miners under pressure as metals prices fall sharply
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, April 28 (Reuters) - European shares hit a
seven-week low on Wednesday after posting their biggest one-day
percentage fall in five months a day earlier, as rating cuts on
Greece and Portugal made investors jittery and hurt bank stocks.
Investor appetite for risky assets such as equities fell
further, with the VDAX-NEW volatility index <.V1XI> rising 13
percent to an 11-week high after surging nearly 19 percent on
Tuesday. The higher the index, which is based on sell and buy
options on Frankfurt's top-30 stocks <0#.GDAXI>, the lower the
market's desire to take risk.
At 0844 GMT, the FTSEurofirst 300 <> index of top
European shares was down 1.7 percent at 1,050.65 points after
touching 1,050.27 -- the lowest since early March. It tumbled
3.1 percent on Tuesday, but is still up 64 percent since hitting
a record low in March last year.
Banks were among the top losers, with STOXX Europe 600
banking index <.SX7P> falling 2.5 percent. Lloyds <LLOY.L>,
Royal Bank of Scotland <RBS.L>, BNP Paribas <BNPP.PA>, Societe
Generale <SOGN.PA> and Credit Agricole <CAGR.PA>, Banco
Santander <SAN.MC> and BBVA <BBVA.MC> fell 2.4 to 5.7 percent.
"Investors are starting to react emotionally. In the current
environment, it's very difficult to impress with
better-than-expected earnings," said Koen De Leus, economist at
KBC Securities.
"The chances of a default by the Greek government are
increasing not by the day but by the hour. If the IMF and
European governments don't come up with something quickly, then
I see the market going down further quite rapidly."
Rating agency Standard and Poor's slashed Greek debt to junk
status on Tuesday and also downgraded Portugal, as investors
worried political pressures could block a multi-billion euro
bailout of Greece. []
Markets in Europe and the United States tumbled in reaction
to signs that the Greek debt crisis was spreading to other
highly indebted states on the periphery of the euro zone.
WIDER MARKET IMPACT
The premium investors demand to hold Greek government bonds
jumped to its highest since late 1996 on Wednesday, the euro hit
a one-year low against the dollar and European corporate credit
default swap spreads were wider.
Spain's IBEX <> index fell 2.8 percent and Portugal's
PSI 20 <> was down 5.9 percent. Portuguese banks Banco
Espirito Santo <BES.LS>, Banco BPI <BBPI.LS> and Banco Comercial
Portugues SA <BCP.LS> tumbled 5.9 to 10.1 percent.
However, Nordea <NDA.ST>, the Nordic region's biggest bank
by value, rose 3 percent after posting better-than-expected
first-quarter operating profits on Wednesday and repeated its
forecast for lower risk-adjusted profit this year.
[]
European Central Bank Executive Board member Juergen Stark
said the onus is on governments to ensure financial market
troubles do not develop into a full blown sovereign debt crisis
[]
Miners also came under pressure as key base metals prices
sharply fell on concerns about Greece. BHP Billiton <BLT.L>,
Anglo American <AAL.L>, Antofagasta <ANTO.L>, Rio Tinto <RIO.L>,
Xstrata <XTA.L> and Eurasian Natural Resources <ENRC.L> fell 0.5
to 2.5 percent.
Among individual movers, Royal Dutch Shell <RDSa.L> rose 1.4
percent after reporting a 49 percent rise in first quarter net
profit, thanks to higher oil prices and an unexpected return to
production growth which helped the oil major beat all analysts'
forecasts.
Sweden's Handelsbanken <SHBa.ST> rose 3.7 percent. It
reported a better-than-expected operating profit in the first
quarter on Wednesday as loan losses and costs came in below
forecast. []
Across Europe, Britain's FTSE 100 index <>, Germany's
DAX <> and France's CAC 40 <> fell 0.8 to 1.5
percent.
