European shares fall most in 10 weeks

By Brian Gorman

LONDON (Reuters) - European shares hit a three-week closing low on Wednesday, hurt by disappointing earnings from Spain's Banco Santander (SAN.MC) and Germany's SAP (SAPG.DE) and by U.S. new home sales unexpectedly falling in September.

The FTSEurofirst 300 .FTEU3 index of top European shares fell 1.9 percent to 980.23 points, its biggest one-day decline since August 17 and its lowest close since October 5.

The European benchmark is still up nearly 52 percent from its lifetime low of March 9.

Banks were among those taking most points off the index. Banco Santander (SAN.MC), the euro zone's biggest bank by market value, fell 3.4 percent after it posted a 2.8 percent fall in nine-month net profit.

BNP Paribas (BNPP.PA), HSBC (HSBA.L) and UBS (UBSN.VX) fell between 1.4 and 3.8 percent.

Ireland's two main banks Allied Irish Banks (ALBK.I) and Bank of Ireland (BKIR.I) plunged 16.6 and 25 percent respectively on uncertainty over Dublin's bank rescue measures.

"People have put a bit more money back into the defensives, the cheaper end of the market," said Philip Lawlor, chief portfolio strategist at Nomura, in London.

"There isn't going to be any double-dip. The market just got a bit ahead of itself. Valuations went from looking relatively cheap to looking relatively expensive."