* FTSEurofirst 300 <> falls 1 pct, led by banks
* Financials spooked by Goldman note on brokers, Citi
* Fortis top percentage loser after solvency plan
By Sitaraman Shankar
LONDON, June 26 (Reuters) - European stocks fell sharply
early on Thursday, led lower by banks on worries of more losses
and after the Federal Reserve kept rates on hold, as expected.
At 0837 GMT, the FTSEurofirst 300 <> index was down
1.04 percent at 1,214.83 points, wiping out most of Thursday's
1.1 percent gain.
Banks were the heaviest weighted losers after Goldman Sachs
lowered 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.
Belgian-Dutch financial services group Fortis <FOR.AS>
<FOR.BR> was the top percentage loser in Europe, falling 7.3
percent after it announced a plan to boost its solvency by more
than 8 billion euros, including issuing new shares and selling
assets. It said it would not pay an interim 2008 dividend.
ING <ING.AS> fell 3 percent, UBS <UBSN.VX> fell 0.8 percent,
HSBC <HSBA.L> lost 1.2 percent and Credit Suisse <CSGN.VX>
slipped 2 percent.
Analysts said markets were focusing more on banking sector
woes than on the Fed's announcement.
"The Fed decision was not a surprise, and anyone can read
what he wants into the Fed's statement," said Thierry Lacraz,
strategist at Swiss bank Pictet.
"The move today is driven by the fact that people are
realising banks need more and more capital, and by the fact that
Goldman has added Citi to its sell list."
Italian bank UniCredit <CRDI.MI> was another big loser,
falling 3 percent after it laid out a strategic plan to expand
in central and eastern Europe and boost earnings.
Analysts at JP Morgan said that the plan so far was
"reassuring on capital but disappointing on earnings".
Across Europe, Britain's FTSE <> was down 0.4 percent,
Germany's DAX <> down 0.7 percent and France's CAC <>
down 0.8 percent.
Losses were limited by strong commodity stocks, with miner
Anglo American <AAL.L> rising 1.8 percent, while oil stocks BP
<BP.L> and Royal Dutch Shell <RDSb.L> rose by around 1 percent.
HALT TO RATE CUTS
European shares have fallen nearly 20 percent so far this
year but the declines -- prompted by a credit market crisis --
have been arrested by periodic Fed rate cuts. The U.S. central
bank has cut rates 2.25 percentage points in 2008.
On Wednesday the Fed ended its rate-cutting spree, holding
interest rates at 2 percent. But it signalled it was in no hurry
to raise borrowing costs, even as it voiced greater concern
about inflation.
All 16 primary dealers polled by Reuters after the Fed
decision expected the Fed to keep rates steady at its next
rate-setting meeting on Aug. 5.
Fourteen out of 16 dealers said they expected the Fed to be
on hold in September, with two expecting a rate increase.
Lacraz said European shares had now fallen so much that they
were beginning to look attractive.
"We would be inclined to buy more at these levels," he said.
Among other movers, news and information provider Thomson
Reuters <TRIL.L> fell 3.8 percent after Morgan Stanley cut its
price target on the stock.
Germany's Hypo Real Estate <HRXG.DE> fell 4.3 percent after
U.S. private equity investor JC Flowers finalised the
acquisition of a 24.9-percent stake in the company, while sports
goods maker Adidas <ADSG.DE> fell 3 percent after rival Nike's
<NKE.N> results showed weakness in the United States.
(Additional reporting by Jo Winterbottom in Milan; editing by
Sue Thomas)
