European shares fall on miners, autos; insurers up

                                
 * FTSEurofirst 300 loses 0.6 pct after Friday's 9-month peak
                                
 * Miner Rio Tinto under pressure on China spy case
                                
 * Volkswagen, Daimler lead automakers lower
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 By Dominic Lau
                                
 LONDON, Aug 10 (Reuters) - European shares fell on Monday
after hitting their highest close in more than nine months on
Friday, as miner Rio Tinto <RIO.L> came under pressure in the
China spy case and Volkswagen led the auto sector lower.
                                
 The FTSEurofirst 300 <.FTEU3> of top European shares closed
0.6 percent lower at 944.64 points. Volumes on the pan-European
index were about 69 percent of its 90-day daily average volume.
                                
 Miners weighed after Rio Tinto shed 3.2 percent after China
stepped up its spying allegations against the company.
[ID:nSYD489638]
                                
 Within the sector, Xstrata <XTA.L>, BHP Billiton <BLT.L>,
Anglo American <AAL.L>, Fresnillo <FRES.L>, Kazakhmys <KAZ.L>
and Antofagasta <ANTO.L> were down 2-4 percent.
                                
 In the auto sector, Volkswagen <VOWG.DE> sank 7.5 percent
after HSBC downgraded its rating on the carmaker to
"underweight" from "neutral" and cut its price target.
                                
 Daimler <DAIGn.DE> was also weaker, losing 3.7 percent after
Morgan Stanley downgraded it to "underweight" from "overweight".
The FTSEurofirst 300 ended higher for a fourth straight week
on Friday, aided by stronger second-quarter corporate earnings
and, despite Monday's losses, is up 46 percent since hitting a
lifetime low in March. It slumped nearly 45 percent last year.
                                
 "It's a fair assumption that corporate earnings growth will,
having turned around, form a base in the second quarter," said
Robert Parker, vice chairman at Credit Suisse's asset management
arm.
                                
 "The outcome has been better than analysts' forecasts. I
suspect that will be the case in the third quarter, although I
question whether it's durable going forward through the middle
of next year," he said, adding that consumers in developed
countries had to cut spending and raise their savings.
                                
 Banks were also generally weaker, with Lloyds Banking Group
<LLOY.L> shedding 4 percent on a report in the Sunday Times that
the bank may consider a multi-billion pound share issue as part
of a partial withdrawal from the government's asset protection
scheme. [ID:nLA282962]
                                
 Other fallers in the banking sector included Barclays
<BARC.L>, BNP Paribas <BNPP.PA>, Royal Bank of Scotland <RBS.L>,
Santander <SAN.MC> and Societe Generale <SOGN.PA>, down 0.5-3.6
percent.
                                
 But Belgian financial services group KBC <KBC.BR> advanced
more than 13 percent, boosted by the company's return to profit
in the second quarter and positive broker comments.
                                
 Across Europe, Britain's FTSE 100 <.FTSE>, Germany's DAX
<.GDAXI> and France's CAC 40 <.FCHI> were down 0.2-0.8 percent.
                                
 "Looking to the coming weeks, seasonal aspects suggest that
the much more bullish sentiment recently will be subjected to a
brief test once the predominantly positive impulses from the
second quarter reporting season run their course," said Gerhard
Schwarz, head of global equity strategy at UniCredit.
                                
 "Setbacks should, however, remain moderate and short-lived.
We continue to recommend exploiting setbacks to increase equity
exposure."
                                
 
                                
 INSURERS SUPPORT
                                
 UK life insurer Friends Provident <FP.L> surged 7 percent
after it said it had agreed to talks with suitor Resolution
following receipt of a revised offer valuing it at $3.2 billion.
[ID:nLA156736]
                                
 Within the sector, Prudential <PRU.L>, Standard Life <SL.L>,
Old Mutual <OML.L> and Swiss Life <SLHN.VX> added 0.6-3 percent.
                                
 Shares in Publicis <PUBP.PA> rose 4.3 percent after the
French company said it had agreed to buy the Razorfish
advertising agency from Microsoft <MSFT.O> for $530 million,
boosting its number-one position in digital ad communications.
                                
 A slew of economic data and reports from across the world
revived hope that the market has seen the worst phase of the
credit crisis and should be on a gradual recovery path.
                                
 Goldman Sachs raised its forecast of China's gross domestic
product growth for 2009 to 9.4 percent from 8.3 percent, while
Morgan Stanley said the U.S. car market had bottomed and looks
poised for a very strong rebound.
                                
 French industrial output rose more strongly than expected in
June as autos output rose, and a Bank of France survey pointed
to prospects of a slight pick up in industry. [ID:nLA179484]
 (Additional reporting by Atul Prakash; Editing by Jon
Loades-Carter)