Worries over HSBC and Greece knock European shares

Mon Nov 5, 2012 5:48pm GMT

* FTSEurofirst 300 falls 0.6 pct to 1,108.58 points

* Euro STOXX 50 sheds 1.2 pct to 2,517.67 points

* Caution prevails ahead of U.S. election

* HSBC falls, Ryanair rises in heavy volume

By Sudip Kar-Gupta

LONDON, Nov 5 (Reuters) - European shares fell on Monday, as mounting provisions at HSBC hit banks while political doubts in Greece also dented equities, with investors avoiding taking large, new positions before the U.S. election.

The FTSEurofirst 300 index closed down 0.6 percent at 1,108.58 points while the euro zone's blue-chip Euro STOXX 50 index declined by 1.2 percent to 2,517.67 points.

HSBC shed 1.3 percent, taking the most points off the FTSEurofirst 300, after the British bank said a U.S. fine for breaching anti-money laundering rules could cost it significantly more than $1.5 billion.

HSBC's regulatory problems overshadowed higher underlying profits at the company and knocked other financial stocks, with the STOXX 600 European banking index falling 1.2 percent to make it the worst-performing equity sector.

Traders added that uncertainty over a Greek vote on labour reforms for the debt-ridden country was also impacting European stocks. On Wednesday, Greece faces a knife-edge parliamentary vote on the reforms, which have led to widespread protests.

"HSBC's results were okay, but the provisions in the U.S. have knocked back the stock. Greece is also a bit of a concern - it's one of those problems which never goes away," said MB Capital trading director Marcus Bullus.

CAUTION PREVAILS AHEAD OF U.S. ELECTION

Trading volumes were below average as many investors retreated to the sidelines ahead of the U.S. Presidential election on Tuesday, with polls showing Republican challenger Mitt Romney neck-and-neck with President Barack Obama.

Dealers expected European equities to make little progress on Tuesday while the U.S. elections played out.

"It's been very rangebound and I expect there'll probably be more of the same tomorrow," said Central Markets senior trader Joe Neighbour.

However, one stock which experienced a surge in trading volumes was Irish airline Ryanair.

Ryanair rose 5.8 percent to top the FTSEurofirst 300 leaderboard, with trading volumes around six times above the usual 90-day average, after Ryanair raised its profit forecast. Rival EasyJet also gained 1.1 percent.

"We've bought Ryanair and we've bought EasyJet," said Neighbour.

Germany's DAX index fell 0.5 percent to 7,326.47 points. MB Capital director Bullus said he would be tempted to buy the DAX if it either broke out above the 7,400 point level or fell to around the 7,200 level.

Invesco European product director Joel Copp-Barton added that Invesco saw some "compelling" opportunities in European stocks, including within the financials and infrastructure holding sectors.

The FTSEurofirst 300 index has fallen back from a 2012 high of 1,122.76 points reached in mid-September.

However, it remains up by nearly 10 percent from late July, when European Central Bank head Mario Draghi pledged fresh measures to protect the euro currency from the region's sovereign debt crisis.

"We do not expect the European economy to suddenly accelerate overnight, but we believe that incremental progress can be made in the more problematic countries over a period of time," said Copp-Barton.

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