European shares fall early, weighed by banks

Fri Jul 18, 2008 3:21am EDT

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LONDON, July 18 (Reuters) - European shares slipped in early trade on Friday, as banks fell after disappointing results from Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) overnight and heavyweight oils lost ground as crude traded well away from recent highs. The FTSEurofirst 300 fell 0.7 percent to 1,137.83 points, but was on track to eke out a gain of just under 1 percent for the week thanks to a jump on Thursday.

Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz) was down 2.4 percent, Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) down 1.3 percent, UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) down 1.5 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) down 1.2 percent.

On Wall Street, shares in JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz) jumped after its results pleased investors but Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) fell in extended trade after a bigger-than-expected loss, sending mixed signals about a banking sector battered by a credit crisis.

Citigroup (C.N: Quote, Profile, Research, Stock Buzz) is due to report later in the session.

Analysts said that despite Merrill, results from banks had not been as bad as feared, and relief from surging crude prices would also help equities.

"It's difficult to derive a general picture on the bank results, but one could say they are more reassuring than not," said Thierry Lacraz, strategist at Swiss bank Pictet.

"The results from Citigroup will be key because it is probably the most exposed to risky assets among the large banks."

"We continue to be underweight on the banking sector, but it will be a positive for financials, consumer stocks and the broad market if the oil price goes to $120."

Oil traded at $131 a barrel, up on the day but a long way off its peak above $147. Oil stocks BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch (RDSa.L: Quote, Profile, Research, Stock Buzz) and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) were off 0.7-1.0 percent.