* FTSEurofirst 300 down 2.1 pct, reversing recent gains
* Airlines, luxury stocks among most hit by flu concerns
* Banks hurt by renewed worries over capital increases
* For up-to-the-minute market news, click on []
By Blaise Robinson
PARIS, April 28 (Reuters) - European stocks tumbled in early
trade on Tuesday, reversing a two-session rally, hit by growing
fears about the economic impact of the swine flu outbreak and
renewed concerns over capital increases in the banking sector.
At 0805 GMT, the FTSEurofirst 300 <> index of top
European shares was down 2.1 percent at 797.04 points.
"This won't help sentiment, but for now, we're at the
beginning of the outbreak and it's hard to anticipate the impact
on the world economy," said Sebastien Barthelemi, analyst at
Louis Capital Markets, in Paris.
"In the short term, airlines, hotel and oil companies are
vulnerable, while drug companies could benefit from the
situation."
Airline stocks were among the hardest hit, with British
Airways <BAY.L> down 5.6 percent and Ryanair <RYA.I> down 3.7
percent.
Fears over the flu outbreak were also dragging on shares of
luxury groups, with Bulgari <BULG.MI> down 4 percent, Richemont
<CFR.VX> down 6.1 percent, Burberry <BRBY.L> down 5.7 percent
and LVMH <LVMH.PA> down 3.1 percent.
"A serious epidemic can be the 'perfect storm' for
international travel...our ball park assessment is that circa 20
percent of luxury products are purchased by people travelling
for some reason," Bernstein analysts wrote in a note.
"If swine flu was like SARS, i.e. far from devastating but
serious enough, the more probable risk for luxury stocks is
short-term weakness and extended range bound trading," they
wrote.
Drugmakers rose, boosted by an expected rise in flu drug
sales. GlaxoSmithKline <GSK.L> gained 1 percent, also lifted by
positive data about the company's Avodart drug, while Roche
<ROG.VX> was up 0.4 percent.
Authorities worldwide took steps on Tuesday to stop the
spread of the new strain of flu that has killed up to 149 people
in Mexico in a couple of weeks and spread to Europe and possibly
Asia, with the World Health Organisation raising its alert
level.
Investors fear the flu could develop into a pandemic and
kill off hopes of a recovery in the global economy.
FRESH CAPITAL HIKE FEARS
The banking sector was also in the spotlight on Tuesday
after the Wall Street Journal reported that U.S. regulators have
told Bank of America Corp <BAC.N> and Citigroup Inc <C.N> that
following recent stress testing of the two banks they may need
to raise more capital.
The shortfall in capital amounts to billions of dollars at
BofA, the paper said. BofA was not immediately available to
comment while a Citigroup spokesman in Hong Kong declined to
comment. A Federal Reserve spokeswoman declined to comment.
Deutsche Bank <DBKGn.DE> was down 6 percent, UBS <UBSN.VX>
was down 4.1 percent, BNP Paribas <BNPP.PA> down 4.7 percent and
Barclays <BARC.L> down 4.4 percent.
Citigroup shares traded in Frankfurt <TRV.F> were down 8
percent, while BofA shares traded in Frankfurt <BAC.F> were down
6.8 percent.
On the macro front, investors were bracing for U.S. consumer
confidence monthly data, due at 1400 GMT, and seeking insight on
the outlook for consumer spending in the world's biggest
economy.
The FTSEurofirst 300 index is down 4.4 percent in 2009, but
has risen 23 percent since reaching a multiyear low in early
March.
(Editing by David Cowell)
