Greek trauma pushes European shares to 4-month low - Reuters UK

Tue May 8, 2012 6:16pm BST

* FTEurofirst 300 down 1.7 percent

* Athens bourse sinks to 20-year low

* KPN jumps 17 pct on America Movil interest

By Tricia Wright

LONDON, May 8 (Reuters) - European shares sank to a four-month closing low on Tuesday after a choppy day's trade, weighed down by new doubts about Greece's commitment to its bailout pledges.

The benchmark Greek index slid 3.6 percent to its lowest level since late 1992, pressured by the banking sector which dropped almost 10 percent on Tuesday.

Athens' bourse has fallen 10 percent since Greece's election results revealed a rejection of support for austerity measures.

Leftist leader Alexis Tsipras began efforts to form a Greek government by renouncing the terms of an international bailout and threatening to nationalise banks.

"It's critical from a markets perspective that whoever forms a government in Greece sticks to the Troika plan and the austerity budget, otherwise you're likely to see further investor flight from the stock market and from the bond market," said Richard Batty, strategist at Standard Life Investments, which has around $250 billion of assets under management.

The FTSEurofirst 300 closed down 1.7 percent at 1,017.48, not far from its session low, having risen 0.7 percent in thin volume on Monday when the London market was shut for a holiday, as banks led a technical rebound.

The index is approaching bearish territory around the 61.8 percent Fibonacci retracement level - at about 1,011 - of the rally spurred by the ECB's handouts of cheap 3-year loans to banks in December and February.

"At the moment the best of course of action if you are invested (in European equities) would be to take out some form of protection, and if you are not invested, to wait for a better entry point," Ioan Smith, strategist at Knight Capital, said.

Mining stocks were hit particularly hard on Tuesday, as the political situation in Greece raised concern about the demand outlook for metals, and as a raft of China economic data out this week loomed large, including numbers on import growth, inflation and bank lending.

Dutch telecoms group KPN bucked the weak market trend, leaping 17 percent after America Movil, the telecoms giant controlled by Mexican tycoon Carlos Slim, said it planned to acquire up to 28 percent of it.

Tullow Oil was the standout gainer on Britain's FTSE 100 leader board, ahead 3.3 percent, after the company found more oil at a Kenya well, with both Credit Suisse and Nomura raising their price targets for the stock.

(Reporting by Tricia Wright; Additional reporting by Toni Vorobyova; Editing by Ruth Pitchford)