* FTSEurofirst drops 0.9 pct, down for third day in a row
* Banks slide on renewed worries over credit crisis
* Airlines tumble after Ryanair profit drops 85 pct
By Rebekah Curtis
LONDON, July 28 (Reuters) - European stocks ended lower on
Monday, dragged down by banks that fell on concerns over credit
ratings at major U.S. mortgage lenders and by a rise in crude
after recent sharp falls, which revived inflation worries.
The pan-European FTSEurofirst 300 index <> ended down
0.9 percent at 1,158.86 points, falling for a third session in a
row.
Banks topped the losers, hit by concerns over the sector
after Standard & Poor's warned on Friday it may cut its ratings
on the preferred shares and subordinated bonds of Fannie Mae and
Freddie Mac.
It cited concerns that U.S. government plans to shore up the
mortgage finance companies may subordinate the debt.
Adding to concerns for banks, Citigroup cut its stance on
European banks to "underweight" from "neutral".
UBS fell 5.5 percent, Royal Bank of Scotland dropped 4.1
percent and Barclays lost 5 percent.
"There is a deep seated problem with many of these banks,"
said David Buik of Cantor Index in London.
"To call the bottom of the market without the odd little
swerve is probably precipitous," he added. "It's going to be
quite a negative month," he said of August.
Adding to the pressure, Citigroup lowered its stance on
European banks to "underweight" from "neutral".
"Write-downs, earnings downgrades, dividend cuts and capital
raising are becoming the norm," the broker said in a note.
HBOS <HBOS.L> shed 7.3 percent after weekend reports that
the bank is due to reveal more asset writedowns when it
publishes results on Thursday.
Europe was hit by another wave of bad economic news on
Monday, with surveys showing German consumer confidence worse
than at any time since recession last struck and yet more house
price falls in Spain and Britain. []
The week is a crucial one for bank earnings, with results
from Santander <SAN.MC>, Deutsche Bank <DBKGn.DE> and UniCredit
<CRDI.MI>.
The DJ Stoxx European bank index <.SX7P> has lost more than
30 percent so far in 2008, as investors dumped banking stocks on
fears over the impact of the credit crisis on balance sheets.
COMMODITIES CUSHION
But the market's fall was cushioned by buoyant mining
shares, helped by gains in metal prices, while energy stocks
rose ahead of key quarterly results in the sector expected this
week and as oil recovered from a recent sharp drop.
Royal Dutch Shell <RDSa.L>, BP <BP.L> and Total <TOTF.PA>
added 0.4-1.3 percent. Among miners, Antofagasta <ANTO.L> rose
7.1 percent, Rio Tinto <RIO.L> added 3 percent and Anglo
American <AAL.L> gained 2.9 percent.
Crude oil <CLc1> rose towards $124 a barrel, bouncing back
from a seven-week low, in what analysts said was technical
buying and short covering after a recent selloff.
"The oil price is a lottery," said Ian Richards, European
equity strategist at Royal Bank of Scotland. "We have absolutely
no visibility."
Airlines, which had recently enjoyed a rally as oil prices
fell from record highs, were hammered after low-cost carrier
Ryanair <RYA.I> posted an 85 percent fall in quarterly net
earnings and warned it was unlikely to make any profit this year
in a battle against recession and oil prices.
Ryanair tumbled 22 percent, while easyJet <EZJ.L> lost 8
percent, British Airways <BAY.L> fell 4.5 percent, and Air
France-KLM <AIRF.PA> dropped 2.2 percent. EADS <EAD.PA>, the
parent of airplane maker Airbus, was down 4.5 percent.
Among the day's other major losers, TNT <TNT.AS> sank 7.5
percent after the Dutch mail company reported a surprise drop in
quarterly operating profit and said it expected the economy to
remain under pressure for the rest of the year.
(Additional reporting by Blaise Robinson in Paris and Patrizia
Kokot in London; editing by Sue Thomas)
