European stocks fall to 2-1/2 yr closing low

LONDON (Reuters) - European shares fell to their lowest close since October 2005 on Thursday, with banks the heaviest weighted losers as a bearish note from Goldman Sachs reignited fears of further losses in the sector.

The FTSEurofirst 300 .FTEU3 provisionally closed down 2.4 percent at 1,198.30 points, suffering its worst one-day percentage fall since mid-March.

Goldman Sachs downgraded U.S. brokerages to neutral and added Citigroup to its “conviction sell” list, forecasting more writedowns.

“We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of a rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales,” Goldman said, estimating that Citigroup would take an additional $8.9 billion in net writedowns in the second quarter.

European banks tracked U.S. losses with Barclays BARC.L shedding 5.7 percent, Credit Suisse CSGN.VX down 4 percent and Deutsche Bank DBKGn.DE down 3.3 percent.

“There is a tremendous amount of uncertainty around in the entire financial services sector because we don’t really understand what they are actually holding and what they are not holding,” Octavio Marenzi, head of financial services consultancy Celent said from Paris, referring to Goldman’s comments on Citigroup.

Reporting by Patrizia Kokot