* FTSEurofirst 300 index ends down 2.0 percent
* Banking, energy, mining top losers
* U.S. economic data dampens sentiment
* Credit Suisse downgrades equities to "benchmark"
* Nokia down 5 pct as attraction among teens fades
By Peter Starck
FRANKFURT, June 3 (Reuters) - European stocks fell on
Wednesday, led by banking, energy and mining shares, as
weaker-than-expected U.S. economic data cast doubts about a
return to growth and a recovery in corporate earnings.
Among individual stocks, Nokia <NOK1V.HE> fell 5 percent
after a study showed the mobile phone maker's popularity among
teenagers was fading [] and construction-to-telecoms
firm Bouygues <BOUY.PA> slumped 7.9 percent after a 55-percent
profit fall and a 2009 sales forecast cut. []
The pan-European FTSEurofirst 300 index <> closed 2.0
percent lower at 868.10 points.
The slide erased most of Monday's steep advance and left the
European benchmark with a gain of 4.3 percent so far this year
and 34.5 percent above the all-time low it set on March 9.
Credit Suisse downgraded equities to "benchmark" from
"overweight", saying in a strategy note: "Risk appetite has
returned to levels not observed since November 2007, and
equity-only risk appetite has reached euphoric levels".
In many sectors, stocks have risen to reach valuation
levels consistent with a return to long-term economic and
earnings growth, a situation which the latest data suggests is
not yet on the cards, Credit Suisse said.
Steffen Neumann, equities strategist at German bank LBBW,
said stock markets were correcting from Monday's upward surge,
which he felt had been exaggerated.
Below-consensus U.S. data was one trigger for Wednesday's
sell-off.
The U.S. Institute for Supply Management's non-manufacturing
index for May and U.S. new factory orders for April came in
below market expectations [], while a U.S. private
sector employment report showed more job losses than expected in
May. []
"The U.S. data disappointed," Neumann said. "The improvement
in leading indicators recently led to hopes that the hard data
would be better but it did not turn out that way."
ING said in a note on the U.S. data that a V-shaped economic
recovery were beginning to look slightly less likely than the
growth graphs in the shape of an U or a W.
"An evaporation of the stock price fuelled confidence gains
of recent months could accelerate any downward adjustment that
may be building," ING said.
IG Index Chief Market Strategist David Jones saw scope for
profit-taking.
"If the balance of consensus shifts towards the perception
that all the low-hanging fruit left in the wake of the stock
market lows earlier this year has already been picked, we may be
in for a sell-off as traders cash in their stock holdings and
book profits," Jones said in a note.
BANKS TOP LOSERS
Banks, which outperformed the broader market during the
recent rally, took most points off the benchmark index on
Wednesday.
Barclays <BARC.L> fell 5.0 percent, extending Tuesday's 13.5
percent slide after Abu Dhabi sold an 11 percent stake in the
British bank, UBS <UBSN.VX> closed down 4.2 percent, and
Deutsche Bank <DBKGn.DE> lost 3.9 percent.
Referring to valuations for European banks, which rose 116
percent on the DJ Stoxx sector index <.SX7P> between March 9 and
June 1, Credit Suisse said that "investors have to price in the
most optimistic normalized earnings scenario in order to see
further upside. We remain cautious".
Among the oil and gas stocks, <.SXEP> which lost ground on
the back on a 3 percent drop in the price of crude oil <CLc1>
[], Repsol <REP.MC> fell 3.3 percent, Total
<TOTF.PA> shed 3.0 percent, ENI <EI.MI> lost 2.3 percent and BP
<BP.L> closed down 2.2 percent.
Basic resources stocks <.SXPP>, notably miners and
steelmakers, gave up some recent gains as copper <MCU3>
[] and gold prices <XAU=> [] fell.
Among miners, Vedanta <VED.L> tumbled 8 percent, Anglo
American <AAL.L> fell 6.0 percent, Rio Tinto <RIO.L> lost 4.6
percent and BHP Billiton <BLT.L> ended 4.1 percent lower.
Steelmaker ArcelorMittal <ISPA.AS> dropped 5.3 percent and
smaller rival Salzgitter <SZGG.DE> lost 5.7 percent after UBS
downgraded the stock to "sell" from "neutral".
"A sustained recovery in supply/demand is unlikely before
2011 at the earliest. Global utilization rates ex-China are
close to 60 percent," UBS said in a steel sector research note.
"We expect demand to rebound after recent destocking, but we
believe this will not be enough to support (a) sustained steel
price increase."
Britain's FTSE 100 index <> fell 2.1 percent, Germany's
DAX <> dropped 1.7 percent and the French CAC 40 <>
dropped 2.0 percent.
(Additional reporting by Catherine Bosley and Brian Gorman in
London; editing by Karen Foster)
