* FTSEurofirst 300 down 1 pct; hits 1-week closing low
* Equities under pressure as S&P cuts Spain outlook
* Miners track higher metal prices; Telekom Austria slumps
By Atul Prakash
LONDON, Dec 9 (Reuters) - European equities closed at their
lowest in more than a week on Wednesday, pressured by financial
stocks, as market sentiment deteriorated after Standard & Poor's
cut its outlook on Spain to negative.
The ratings agency's revised outlook and a warning that
Spain faced a risk of a debt downgrade in two years if the
government did not take tough action came just one day after
Fitch Ratings cut Greek debt to the lowest level in the euro
zone on worries over its public finances.
Investor appetite for risky assets such as equities fell,
with the VDAX-NEW volatility index <.V1XI> rising 4.1 percent to
a 1-week high. The higher the index, which is based on sell and
buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the lower
the market's desire to take risk.
"Everyone is extremely vigilant at the moment and you can
not blame them. Greece was downgraded yesterday and with Spain
having around a 16 percent unemployment rate the outlook for the
Spanish economy is pretty horrible," said David Buik, partner at
BGC Partners in London.
"It really does not come as any surprise and watch this
space for other countries," he added.
The FTSEurofirst 300 <> index of top European shares
ended down 1 percent, the lowest close since Nov. 30. The
benchmark index is still up 20 percent this year and has surged
54 percent since hitting a record low in early March.
Financial stocks were among the top losers, with the DJ
STOXX European banking index <.SX7P> falling 1.6 percent.
Spain's largest bank, Santander <SAN.MC>, fell 4.1 percent and
BBVA <BBVA.MC> lost 4 percent, while Spain's benchmark shares
index <> was down 2.4 percent.
Among other European banks, Barclays <BARC.L>, Royal Bank of
Scotland <RBS.L>, UBS <UBSN.VX>, Credit Suisse <CSGN.VX>,
Deutsche Bank <DBKGn.DE> Commerzbank <CBKG.DE> and Deutsche
Postbank <DPBGn.DE> fell 0.6 to 3.3 percent.
GREEK BANKS SLIP
Greek banks were also under pressure. National Bank
<NBGr.AT>, EFG Eurobank <EFGr.AT>, Alpha Bank <ACBr.AT> and
Piraeus Bank <BOPr.AT> were down 6.6 to 8.4 percent.
The Greek banking index <.FTATBNK>, down 5.8 percent on
Wednesday, has dropped 18 percent so far this week and about 38
percent since mid-October on mounting fears over the country's
public finances.
"Greece's debt problems are more of a nuisance than Dubai's
woes, because a number of European banks have stakes in local
lenders or are exposed to the country's debt, and it revives the
spectre of a domino effect in east Europe," said David Thebault,
head of quantitative sales trading at Global Equities, in Paris.
"But overall, the risk is limited for European equities. We
have been retreating over the past few days but stocks are still
moving in a range, although closer to the bottom of the range.
The chances of seeing a Christmas rally are intact," he said.
Fortis <FOR.BR> shed 7.8 percent after Fitch revised its
ratings outlook on the Belgian insurer to "negative" from
"stable" due to its exposure to Greek debt. []
Drugmakers also slipped, with AstraZeneca <AZN.L>,
GlaxoSmithKline <GSK.L>, Merck <MRCG.DE>, Novartis <NOVN.VX>,
Roche Holding <ROG.VX>, Sanofi-Aventis <SASY.PA> and Shire
<SHP.L> falling 0.2 to 2 percent.
In industry news, European Union antitrust authorities said
they had raided several pharmaceutical companies in a number of
EU member states on suspicion of abusing a dominant position in
the market. []
Among individual movers, Telekom Austria <TELA.VI> slumped
14 percent after the group said its earnings would decline next
year as customers abandoned its domestic fixed-line service and
price pressure from both regulators and competitors stayed high.
Volkswagen <VOWG.DE> gained 0.7 percent as investors
welcomed a plan by Europe's largest carmaker to take a 19.9
percent stake in Japanese rival Suzuki Motor Corp <7269.T>.
Suzuki shares surged 3.5 percent in Tokyo.
Across Europe, Britain's FTSE 100 index <>, Germany's
DAX <> and France's CAC 40 <> fell 0.4 to 0.7
percent. All these indexes are up about 17 percent this year.
(Additional reporting by Joanne Frearson in London and Blaise
Robinson in Paris; editing by Simon Jessop)
