* FTSEurofirst 300 falls 0.65 percent
* Financials slip for third day
* BG Group gains on Brazil oil find
By Joanne Frearson
LONDON, Sept 11 (Reuters) - European shares continued their
decline, falling for the third day in a row on Thursday, as
investors remained nervous about the fate of the banking sector,
sending financial stocks sharply lower.
The FTSEurofirst 300 <> index of top European shares
ended down 0.65 percent at 1,140.71 points after falling as low
as 1,127.90 points. The benchmark is down more than 24 percent
so far this year.
Banks were the biggest sectoral loser on the index, with
Royal Bank of Scotland <RBS.L> falling 2.4 percent, BNP Paribas
<BNPP.PA> dropping 0.9 percent, Dexia <DEXI.BR> slipping 3.3
percent and Credit Agricole <CAGR.PA> shedding 2.1 percent.
"Overall on a 12 month view, the financial sector is
unlikely to be a strong performer," said Ronan Carr, European
strategist at Morgan Stanley.
"The profit outlook for banks will continue to be difficult,
bad debt is likely to rise and the funding backdrop will remain
difficult. A weakening economic backdrop will also not help the
banks," he added.
Nervousness spilled over from a sharp decline in U.S.
investment bank Lehman Brothers <LEH.N>.
Lehman shares fell over 40 percent in the U.S. at one point
on Thursday and were down 30 percent as European markets closed.
Wall Street was questioning whether the investment bank will
survive because of its failure to sell assets to cover losses
from risky real estate investments.
A Reuters poll of around 200 economists in the U.S., Europe,
Japan and Britain also highlighted investors' concerns. The
survey showed a still-floundering U.S. economy grappling with
the credit crunch and a deterioration in the outlook for Europe
-- particularly in Britain.
Bank of England Governor Mervyn King said the outlook for
growth had worsened. The British economy failed to grow for the
first time since the early 1990s in the second quarter and many
analysts said things could soon get even worse.
"It's going to be an ugly third and fourth quarter for
earnings," said Karen Olney, head of European equity strategy at
Merrill Lynch. "The market hasn't quite discounted the fall in
profit you have in a recession."
DEUTSCHE BANK DOWN
Deutsche Bank <DBKGn.DE> fell 2.6 percent. The bank said it
was in advanced talks to take a stake in rival Deutsche Postbank
<DPBGn.DE>. []
Away from banks,French insurer AXA <AXAF.PA> fell 3.34
percent after UBS downgraded the stock to "neutral" from "buy".
Across Europe, Britain's FTSE 100 fell 0.89 percent, while
Germany's DAX lost 0.5 percent and the French CAC 40 fell 0.8
percent.
Miners bucked the weaker trend. BHP Billiton <BLT.L>, Anglo
American <AAL.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>,
Antofagasta <ANTO.L> and Rio Tinto <RIO.L> rose between 0.2 and
5.2 percent.
"Now is the time to get back into the commodity sector.
Stocks look cheap with groups only trading on single digit price
to earnings ratios. Balance sheets remain strong and the supply
of oil is tight," said Carr of Morgan Stanley.
Pharmaceutical stocks were under pressure after Goldman
Sachs cut AstraZeneca <AZN.L> to "sell" and downgraded Shire
<SHP.L> to "neutral" from "buy". The groups were trading down
around 2.9 percent and 2 percent respectively.
Shares in Britain's BG Group <BG.L> and Portugal's Galp
<GALP.LS> jumped after partner Petrobras <PETR4.SA> said the
Iara oil field in Brazil may yield 3-4 billion barrels of
recoverable reserves.
Gas producer BG, which rose 4.3 percent, owns 25 percent of
the subsalt oil block in which Iara is situated.
(Additional reporting by Brian Gorman in London and Peter
Starck in Frankfurt; editing by Elaine Hardcastle)
