*FTSEurofirst 300 index falls 2.0 pct
*Banks weigh as rumours of losses resurface
*Buoyant oil weighs on airlines and autos
*Broker upgrades lift telecoms
By Patrizia Kokot
LONDON, July 1 (Reuters) - European shares extended losses
in early trade as banks weighed amid fears of further losses and
as buoyant oil kept inflation as a key focus for investors.
The FTSEurofirst 300 index <> of top European shares
fell 2.0 percent to 1,177.32 points in early trade.
"There are no reasons to own shares at the moment," said
asset manager Stefan de Schutter at Alpha Trading in Frankfurt.
"Oil is still very high and the banking crisis is
continuing," he added, noting vague rumours overnight of a
profit warning at Lehman Brothers <LEH.N>, which fell 11 percent
during regular trading in the United States.
Bank were the biggest drag on indexes in Europe with the DJ
Stoxx European banks index <.SX7P> down 2 percent. BNP Paribas
<BNPP.PA> fell 2 percent, Societe Generale <SOGN.PA> lost 2.6
percent and UBS slid 4.4 percent.
UBS was also under pressure after Merrill Lynch removed it
from its "Europe 1 List". In addition, the U.S. Justice
Department said it asked a federal court to authorise the
Internal Revenue Service to request information from UBS about
U.S. taxpayers who may be using Swiss bank accounts to evade
federal income taxes.
Banco Popular <POP.MC> lost 3 percent following a report in
newspaper Negocio which said legal advisor Hassans will no
longer help Blueprime in its move to buy a 20 percent stake in
the Spanish bank.
Airlines were also under pressure as oil rallied back above
$141 a barrel with British Airways <BAY.L> down 2.4 percent, Air
France-KLM <AIRF.PA> down 1.5 percent and Lufthansa <LHAG.DE>
down 1.2 percent.
And automotive stocks were major decliners on European
indices, with BMW <BMWG.DE>, Porsche <PEUP.PA> and Renault
<RENA.PA> all down between 3 and 5 percent ahead of the release
of North American car sales for the month of June.
Around Europe, Britain's FTSE <FTSE> lost 0.9 percent,
Germany's DAX <> shed 0.7 percent and France's CAC lost
1.4 percent.
Other major fallers included France's Safran <SAF.PA>, which
saw its shares downgraded to "underperform" from "outperform" at
Cheuvreux and fell 8 percent.
TELECOMS GAIN GROUND ON BROKER UPGRADES
On the upside, telecoms groups gained with Deutsche Telekom
<DTEGn.DE> adding 2 percent after JP Morgan raised its stance on
the stock to "overweight", with a target price of 13.50 euros.
"A poorly structured Sprint bid remains a risk, but in our
view is becoming increasingly unlikely as the U.S. presidential
election approaches," the broker said in a note.
British peer Vodafone <VOD.L> rose 1.7 percent after Exane
BNP Paribas raised it to "outperform" as it sees a "more limited
perceived M&A risk" and "higher-than-average revenue growth".
(Editing by David Cowell)
