* FTSEurofirst 300 down 0.7 percent
* Financials, drug stocks top-weighted losers
* Dollar weakness lifts commodity stocks, hits EADS
By Sitaraman Shankar
LONDON, Aug 18 (Reuters) - European shares fell early on
Monday as investors sold heavyweight banks and defensive
drugmakers to return to the recently battered mining sector amid
a weaker dollar, while oil shares tracked crude higher.
At 0843 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.8 percent at 1.179.79 points. The
index is flat so far this month and has gained in only one month
so far this year.
Banks were broadly lower, with UBS <UBSN.VX>, Societe
Generale <SOGN.PA> and Credit Suisse <CSGN.VX> down 1.2 to 2.3
percent, while drugmakers weakened, with GlaxoSmithKline <GSK.L>
and Roche <ROG.VX> off 0.6 and 1.5 percent respectively.
Monday brought a pause to the trend of a rising dollar and
falling metal and crude prices.
The dollar fell after hitting a six-month high against the
euro <EUR=>, while gold <XAU=> jumped more than $10, copper
futures <MCU3=LX> gained 1.5 percent and oil <CLc1> ticked up to
above $113.
But analysts said they expected the underlying trend to be
for a firmer dollar, which would be positive for European
exporters' shares.
"I suspect continued weakness in the euro as the figures
coming out of Europe are going to be poor," said Justin Urquhart
Stewart, investment director at Seven Investment Management.
Data released last week showed the euro zone economy
recorded its first-ever contraction in the second quarter,
pulled own by falling activity in its biggest economies.
"For the last one month, the two main trends in the market
have been a clear slowdown in euro area growth and, on the
positive side, lower oil and food prices," said Tuomas
Komulainen, strategist at Danske Market Securities in Helsinki.
"How we go ahead depends on how the European Central Bank
reacts at its next meeting on Sept. 4 -- now the inflation
situation is much easier while the growth side is weakening even
more than expected," he said.
The European Central Bank has moved only once in the past 14
months, raising rates 0.25 percentage points in July.
The U.S. Federal Reserve, on the other hand, has cut rates
by 3.25 percentage points over the past year.
Across Europe, Britain's FTSE 100 <> fell 0.4 percent,
while Germany's DAX <> and France's CAC <> fell 0.8
percent, and U.S. index futures <SPc1> <NDc1> and <DJc1> pointed
to a weaker start on Wall Street.
COMMODITY REBOUND
Miners and steelmakers gained, with Arcelor Mittal <MTP.PA>,
Rio Tinto <RIO.L>, Anglo American <AAL.L> and BHP Billiton
<BLT.L> rising 0.7 to 2 percent. BHP reported a 30 percent rise
in second-half profit, in line with market forecasts.
The DJ Stoxx European Basic Resources index <.SXPP> rose 0.9
percent after falling 12 percent in July and 9 percent so far
this month.
Among oil shares, Total <TOTF.PA> and Royal Dutch Shell
<RDSa.L> gained 1 percent, while BP <BP.L> dipped 0.1 percent.
But the rise in the euro took its toll on European aerospace
and defence group EADS <EAD.PA>, which fell 2.5 percent.
And airline stocks fell on the higher oil price, with
British Airways <BAY.L>, Lufthansa <LHAG.DE> and Air France KLM
off 2-3 percent.
(Reporting by Sitaraman Shankar; Editing by Quentin Bryar)
