* FTSEurofirst 300 tumbles 2.1 percent
* Oil shares, banks lead the decline
* BOE holds interest rates at 5 pct
By Rebekah Curtis
LONDON, July 10 (Reuters) - European stocks fell 2 percent
on Thursday as global growth concerns hit oil shares, and banks
clung to their day's heavy losses as some major U.S. financials
plunged on worries about the strength of their balance sheets.
The pan-European FTSEurofirst 300 index <> ended down
2.1 percent at 1,156.98 points, wiping out a 1.7-percent gain
notched up the day before.
The oil sector topped the losers, with BP <BP.L>, Royal
Dutch Shell <RDSa.L> and Total <TOTF.PA> all shedding between
2.1 and 2.8 percent after U.S. inventory data on Wednesday
showed a surprise rise in gasoline stocks, which can point
towards a decline in consumer demand.
Wall Street rose in choppy trade, but shares in mortgage
providers Freddie Mac <FRE.N> and Fannie Mae <FNM.N> dropped 22
percent and 12 percent, respectively, on investor concern over
whether they would be able to obtain the capital needed.
Adding to nerves in the sector, Lehman Brothers <LEH.N>
shares tumbled more than 8 percent on talk that bond fund Pimco
was reducing business with the bank. A Lehman spokesman declined
to comment, while a Pimco spokesman said Pimco continued to
trade with Lehman.
"A lot of eyes are on Lehman at the moment. That's the kind
of thing that puts the fox in the hen coop as far as the
financials are concerned," said Jeremy Batstone-Carr, head of
private client research at Charles Stanley in London.
Among European banks, Santander <SAN.MC> shed 1.9 percent,
HSBC <HSBA.L> lost 1.4 percent and UBS <UBSN.VX> dropped 2.4
percent.
"One thing is pretty certain and that is that we are some
distance from the financial sector being out of the woods,"
Batstone-Carr added.
"Very few people imagined that the financial sector would
escape all this unscathed."
The DJStoxx index of European banks <.SX7P> has fallen 35
percent so far this year as an uncertain earnings outlook and
multi-billion-dollar writedowns have dogged investors.
BOE HOLDS RATES
The Bank of England left British interest rates unchanged at
5 percent, as expected.
Around Europe, Britain's FTSE <> was down 2.2 percent,
Germany's DAX <> fell 1.3 percent and France's CAC <>
dropped 2.5 percent.
French supermarket group Carrefour <CARR.PA> was the biggest
percentage loser in Europe, losing 8.6 percent as it
disappointed investors with its second-quarter sales and
cautious outlook. Cazenove lowered its rating on the stock to
"underperform" from "outperform".
"Carrefour does appear to have been caught by surprise by
the downturn and the strategy to cope seems to be being
developed on the hoof," the broker said in a note.
Danone <DANO.PA>, a large supplier to Carrefour, shed 6
percent and peers Nestle <NESN.VX> and Unilever <UNc.AS> fell
4.3 and 4.8 percent respectively.
Britain's Associated British Foods <ABF.L> fell 3.8 percent
after releasing third-quarter sales which showed underlying
growth at its discount fashion stores started to slow markedly.
Bucking the negative market trend, Norwegian aluminium group
Norsk Hydro <NHY.OL> pushed up the industrial metals sector by
rising 7.3 percent on news that China's top 20 aluminium
producers have agreed to cut production by 5-10 percent from
July to support prices. Three-month aluminium futures <MAL3> hit
record highs in London on Thursday.
Fresenius Medical Care <FMEG.DE>, the German dialysis care
provider, shrugged off a negative change in an S&P outlook, to
gain 5.3 percent after the U.S. Senate cleared legislation that
includes a combined payment for dialysis drugs and services.
(Additional reporting by Patrizia Kokot)
