* FTSEurofirst 300 ends down 0.2 pct at two-week closing low
* Banks sag as Paulson backs away from buying bad debt
* Miners hit by renewed worries over global economy
By Blaise Robinson
PARIS, Nov 13 (Reuters) - European stocks fell on Thursday,
declining for the fifth time in seven sessions and ending at
their lowest closing level in two weeks on lingering worries
over the global economy and corporate profits.
The FTSEurofirst 300 <> index of top European shares
closed the roller-coaster session 0.2 percent lower at 852.55
points.
Tumbling bank stocks were the biggest drag on the market,
hit by signs that the U.S. Treasury was backing away from using
a $700 billion rescue fund to cleanse bank balance sheets of bad
mortgage debt and focus instead on buying stakes in banks.
Shares in British lenders were among the most hammered, amid
mounting worries that the UK economy faces tough times ahead.
Barclays <BARC.L> lost 6.2 percent, Royal Bank of Scotland
<RBS.L> shed 6.1 percent and HBOS <HBOS.L> dropped 7 percent.
"In the short term, the news flow will remain negative, with
more jobs destruction, falling consumer spending, etc etc. And
the gloom is on both the macro and the micro fronts, with profit
warnings on the rise," said Yann Lepape, economist at Oddo
Securities, in Paris.
"We are reaching the worst of the recession in developed
countries and fourth-quarter figures, which will be quite bad,
could be the gloomiest that we will see," he said.
"But the reaction from authorities has been very bold, and
on the longer term, that should prevent, in our view, the
biggest risk of all: deflation."
Mining stocks, which have been dumped over the past weeks on
fears that the economic slowdown would spread to emerging
economies, sagged on Thursday, with Xstrata <XTA.L> losing 4.8
percent, Antofagasta <ANTO.L> falling 6.9 percent and BHP
Billiton <BHP.L> dropping 2.3 percent.
The FTSEurofirst 300 has lost 44 percent so far this year,
hit by fears that the crisis in the credit market would spark a
deep global downturn.
RECESSION? DEPRESSION?
Testifying at a U.S. House Oversight and Government Reform
Committee hearing on Thursday, billionaire investor George Soros
said: "A deep recession is now inevitable and the possibility of
a depression cannot be ruled out."
Soros said hedge funds will be "decimated" by the current
financial crisis and forced to shrink their portfolios by 50-75
percent.
Valerie Plagnol, chief strategist at CM-CIC Securities in
Paris, said: "This is a case study of a massive deflationary
economic situation that is building up. There is no doubt we are
entering into a recession and it could be pretty nasty and deep.
"At this point, it's hard to say that we have completely
avoided the risk of a depression and that's probably one of the
reasons why the market is still extremely weak and nervous."
Some economists define a recession as a widespread decline
in GDP and employment, lasting from six months to a year, while
a depression is a long-term economic state characterised by
unemployment, low prices and low levels of trade and investment.
Around Europe, UK's FTSE 100 index <> dropped 0.3
percent, hit by sagging banking and mining shares, while
Germany's DAX index <> gained 0.6 percent and France's CAC
40 <> rose 1.1 percent.
On the upside, GDF Suez <GSZ.PA>, Europe's largest utility
by sales, gained 5 percent after the company confirmed its
profit growth target.
Telecoms shares, seen as defensive stocks, gained ground,
with France Telecom <FTE.PA> up 2.8 percent and Vodafone <VOD.L>
up 1.8 percent.
BT <BT.L> surged 8.9 percent after posting second-quarter
earnings and revenues ahead of forecasts and laying out plans to
cut 10,000 jobs and boost its pension schemes.
(Reporting by Blaise Robinson; editing by Simon Jessop)
