* FTSEurofirst 300 down 0.5 pct; falls for 2nd day
* Nears technical support, potential for further sell off
* Financials, oils among top decliners
* For up-to-the-minute market news, click on []
By Atul Prakash
LONDON, June 23 (Reuters) - European shares fell for a
second straight day on Wednesday on caution over global economic
growth, after a surprise drop in U.S. home sales, and could fall
further if a key technical support level is breached.
At 0825 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.5 percent at 1,045.55 points after
closing 0.4 percent lower in the previous session, following
nine days of gains.
Financial stocks were among the top losers, with Barclays
<BARC.L>, BNP Paribas <BNPP.PA>, Credit Agricole <CAGR.PA> and
Societe Generale <SOGN.PA> down 0.5 to 1.7 percent.
Investors stayed cautious after data showed late on Tuesday
existing U.S. home sales fell 2.2 percent in May. The drop was
surprising given that pending home sales, which usually lead
resales by a month or two, rose in April, and economists said
they expected a pick-up in June. []
"That is a very sensitive area because don't forget that the
whole financial crisis started with the U.S. housing market and
the last thing we want to see is a renewed weakness in the U.S.
housing market," said Mike Lenhoff, chief strategist at Brewin
Dolphin.
"For the past few months, we have seen a recovery and that
has helped sentiment. But if housing activity starts weakening
again, then people will be quite upset about that."
The euphoria over China's move to allow a flexible yuan
faded fast, with focus shifting to macro-economic numbers. A
survey showed the sprightly expansion achieved by euro zone
services and manufacturing companies since March slowed slightly
in June. []
China's yuan inched higher on Wednesday, settling down after
the biggest swings since 2005 and driving home the message that
Beijing's promise of currency flexibility will not produce the
rapid gains its trading partners would like. []
CHARTS SHOW WEAKNESS
Charts suggested more declines in European stocks in the
coming days.
"The short-term picture is looking bleak because of the
headwinds -- the negative news flow, the lack of interest in the
market and the lack of volumes," said Manoj Ladwa, senior trader
at ETX Capital.
He said the FTSEurofirst 300 index could find support at
around 1,026-1,027 points -- its 200-day moving average and a 50
percent Fibonacci retracement of the fall from mid-April to late
May, but a breach of the level could push down the index towards
the 1,000 level.
Investors also took note of a warning by top U.S. economic
leaders saying that Group of 20 nations should beware of putting
measures in place to curb deficits so quickly that they risk
pushing the global economy back into recession. []
The market awaited the outcome of a meeting by the U.S.
Federal Reserve, which is expected to renew its promise to hold
benchmark interest rates exceptionally low for an extended
period on Wednesday and may acknowledge a slight slowdown in the
pace of U.S. economic recovery. []
A fall in crude oil <CLc1> prices put pressure on energy
stocks, with Royal Dutch Shell <RDSa.L>, Repsol <REP.MC> and
StatoilHydro <STL.OL> down 0.8 to 1 percent.
Among individual stocks, chemical industry leader BASF
<BASF.DE> said it had agreed to buy Cognis [] for 700
million euros ($939.2 million) and expects the household
products additives maker to help it weather economic turbulence,
pushing its shares up 1.1 percent. []
Across Europe, the FTSE 100 <>, Germany's DAX <>
and France's CAC 40 <> fell 0.1 to 0.5 percent. The Thomson
Reuters Peripheral Eurozone Countries Index <.TRXFLDPIPU> fell
0.3 percent.
(Editing by Simon Jessop)
