August 8, 2012 / 9:57 AM / 7 years ago

European shares pull back from four-month highs

* FTSEurofirst 300 down 0.5 percent

* StanChart top riser after steep falls (Updates index, stock levels)

By Tricia Wright

LONDON, Aug 8 (Reuters) - European shares weakened on Wednesday, retreating from more than four-month highs hit in the previous session, although expectations that central banks could provide further support to boost ailing economies were seen likely to stem any weakness.

The FTSEurofirst 300 was down 0.5 percent at 1,088.45 by 0941 GMT, having closed up 0.8 percent at 1,094.19 points on Tuesday, its highest closing level since March 19.

“Sentiment is still broadly cautious - people realise there are still a lot of hurdles to be overcome. But investors can’t ignore potential stimulus from central banks and what impact that’s had on stock markets in the past,” Keith Bowman, equity analyst at Hargreaves Lansdown, said.

European stocks have soared since ECB President Mario Draghi said two weeks ago that the central bank was “ready to do whatever it takes to preserve the euro,” sparking expectations of bold measures to help lower the borrowing costs of debt-laden Spain and Italy.

Since Draghi’s comments, the FTSE 100 has gained 6.2 percent, the DAX has surged 8.8 percent and the CAC has soared 12 percent.

On Tuesday, Boston Fed Bank President Eric Rosengren said the central bank should launch another bond-buying programme of whatever size and duration is necessary to get the economy back on its feet.

Meanwhile, Fed Chairman Ben Bernanke said on Tuesday the U.S. economic recovery was still fragile and low interest rates were necessary to promote stronger growth and bring down unemployment.

Standard Chartered clawed back some of its losses, up 7 percent to top the FTSEurofirst 300 leader board, having dived 16.4 percent on Tuesday in hefty volume after New York’s top bank regulator accused the UK bank of hiding $250 billion in transactions tied to Iran, in violation of U.S. law.

Trading volume in Standard Chartered stood at around two and a half times its 90-day daily average. Standard Chartered went ex-dividend on Wednesday, limiting some of its gains.

“Expect further volatility and this may not be the last of it for the banking sector - another skeleton seems to come out of the closet every other week,” said Manoj Ladwa, head of trading at TJ Markets.

The Standard Chartered news came hot on the heels of the Libor interest rate rigging scandal, which has embroiled Barclays and RBS among others.

Rio Tinto was another solid gainer, ahead 1.9 percent, after the global miner said it would stick to its $16 billion spending plan for the year, even as weaker prices dragged first half profits 34 percent lower.

Fellow basic resource stocks also advanced, up 0.5 percent, ahead of a slew of data from top metals consumer China this week which should paint a clearer picture on the extent to which it has been hit by softness in its export markets.

Reporting by Tricia Wright; Additional reporting by Blaise Robinson, editing by Catherine Evans

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