* FTSEurofirst 300 down 0.8 pct, hits three-week low
* Financials among top losers on euro zone debt concerns
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, April 18 (Reuters) - European shares dropped to a
three-week low in morning trade on Monday on nervousness ahead
of quarterly earnings results and lingering worries about
indebted euro zone countries.
Analysts and fund managers said they expected a long period
of rangebound trade, but that equities would gather momentum in
the second half of the year on an improving global economic
outlook and support from merger and acquisition activities.
At 0858 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.8 percent at 1,122.94 points after
hitting 1,122.87 points, the lowest since late March. The
appetite for riskier assets fell, with the Euro STOXX 50
volatility index <.V2TX> surging 9 percent.
Financials were the worst hit, with the European banking
index <.SX7P> falling 1.6 percent and the Thomson Reuters
Peripheral Banking index <.TRXFLDPIPUBANK> down 3 percent, on a
newspaper report that Greece had asked to restructure its debt,
though the country's finance ministry later denied the report.
Alpha Bank <ACBr.AT> declined 3.1 percent, while BBVA
<BBVA.MC> fell 2.7 percent. Investors waited for results from
Citigroup <C.N>, which is expected to report a drop in quarterly
profit and revenue on an uncertain trading environment and weak
consumer loan demand. []
"Company results haven't been that great, and there are
concerns that margins for a lot of companies are not going to
rise. The bias for the market is more on the downside," said
Koen De Leus, strategist at KBC Securities in Brussels.
"The debt crisis is far from over. The big worry is Greece,
and there is some realisation that the country could default."
Investors were also concerned that big electoral gains by
Finland's anti-euro True Finns Party could disrupt a bailout
plan for Portugal. []
These concerns pushed the euro to a 10-day low against the
dollar, while the cost of insuring Greek debt against default
rose on Monday.
"Not least among the euro area periphery challenges is
Greece. Despite its loan programme, the market remains highly
skeptical of the country's solvency," Deutsche Bank said.
Across Europe, Britain's FTSE 100 <> fell 0.7 percent,
Spain's IBEX <> was down 1.2 percent, while Portugal's PSI
20 <> dropped 1 percent. The Thomson Reuters Peripheral
Eurozone Countries Index <.TRXFLDPIPU> fell 2.1 percent.
TIRED MARKETS
Market watchers said the equities market was looking tired.
"We may have a pause as we go into the summer, but we will
probably have a late surge, mainly because the U.S. economy is
still growing quite well," said a London-based fund manager,
whose company manages about $80 billion.
"There is no return on cash, and you are not going to buy
government bonds. People will probably buy risk assets, which is
equities. And you have got a bit of M&A, which is going to
underpin the market. Over the end of the year, I suspect that it
will be higher than where it is just now."
He said the sellers were mainly hedge funds, which were
increasing their short positions on the market.
J.P.Morgan Cazenove saw headwinds such as strong crude oil
prices and said it expected mixed company results and guidance
in the first quarter, but forecast new highs in the second half
of the year and advised investors to buy stocks on price dips.
The STOXX Europe 600 Food & Beverage index <.SX3P> fell 1.3
percent, led lower by Nestle <NESN.VX>, down 3.6 percent, which
agreed to take a 60 percent stake in China's Yinlu Foods Group.
Synthes <SYST.VX> rose 6.5 percent as it confirmed it was in
talks with Johnson & Johnson <JNJ.N> after reports the group was
looking to buy the company for about $20 billion.
(Editing by Will Waterman)
