* FTSEurofirst 300 falls 2.4 pct to lowest close since Sept
* Banks hurt as interbank rates rise, further debt concerns
* Korean tension adds to nervousness
By Brian Gorman
LONDON, May 25 (Reuters) - European shares fell to their
lowest close in nearly nine months on Tuesday, with banks hit as
interbank lending rates rose and worries persisted that
austerity measures to be taken in European economies will hurt
growth.
The pan-European FTSEurofirst 300 <> index fell 2.4
percent to 949.87 points, its lowest close since early
September, 2009. The index is down more than 14 percent from a
peak last month over worries about the euro zone's sovereign
debt problems.
Banks to fall on Tuesday included Bank of Ireland <BKIR.I>,
Allied Irish Banks <ALBK.I>, Banco Santander <SAN.MC>, BBVA
<BBVA.MC>, Credit Agricole <CAGR.PA>, Lloyds <LLOY.L>, Societe
Generale <SOGN.PA> and UniCredit <CRDI.MI>, down between 3.9 and
12.8 percent.
Some upbeat U.S. economic data helped the index come off its
low of 939.64 for the day.
"Consumer confidence was a very strong number but when you
take out the day-to-day noise what's driving the markets so
badly at the moment is concern about European banking risk, with
a focus on savings banks in Spain after the restructuring of
CajaSur," said Bob Parker, vice chairman of asset management at
Credit Suisse.
He added: "Concern is shifting to what writedowns banks are
going to have to make, and to what extent is there a systemic
problem in the Spanish savings bank system."
Southern European countries such as Spain and Greece have
announced radical austerity measures to cut their national debt,
but strategists say this may hurt growth.
Dollar interbank rates rose on Tuesday and were seen pushing
higher as the euro zone debt crisis made banks wary of lending
to European peers. Bund futures hit a record high.
Across Europe, the FTSE 100 <>, Germany's DAX <>
and France's CAC 40 <> ended the day between 2.3 and 2.9
percent lower.
Wall Street was lower around the time European bourses were
closing. The Dow Jones <>, S&P 500 <.SPX> and Nasdaq
Composite <> were down between 1.7 and 1.9 percent.
Spain's IBEX <> lost 3.1 percent, Portugal's PSI 20
<> fell 2.8 percent and Italy's benchmark <.FTMIB> was
down 3.4 percent.
OILS, PHARMAS FALL
Virtually every sector fell, but oils and drugmakers were
among those taking most points off the index.
Crude prices <CLc1> fell more than 2 percent. Total
<TOTF.PA>, Repsol <REP.MC> and StatoilHydro <STL.OL> fell
between 1.3 and 3.5 percent.
BP <BP.L> fell 1.6 percent, and is down more than 27 percent
from a peak last month as it has not yet managed to shut off the
oil gushing from its deepwater well blowout in the Gulf of
Mexico.
Heavyweight pharmaceuticals to fall included GlaxoSmithKline
<GSK.L> and Roche <ROG.VX>, down 2.1 and 2.2 percent
respectively.
Nervousness in the market was exacerbated by heightened
political tensions on the Korean peninsula after the North
Korean leader Kim Jong-il ordered his military to be on a combat
footing. []
"When you have uncertainty like this you have a flight to
quality and an exit from equity markets," said Parker.
Macroeconomic news, however, was generally upbeat. U.S.
consumer confidence rose for the third straight month in May to
the highest in more than two years. []
Single-family home prices were unchanged in March from
February, but fell in the first quarter on renewed price
pressure as federal aid faded away, Standard & Poor's/Case
Shiller home price indexes showed. []
Euro zone industrial new orders rose in March at their
fastest rate in 10 years.[]
(Editing by Greg Mahlich)
