Europe shares drop as US worries hit banks, techs

                                
 By Amanda Cooper
                                
 LONDON, Jan 16 (Reuters) - European shares fell on Wednesday
as growing fear of a U.S. recession hit banks, while tech stocks
recoiled after a grim outlook from Intel <INTC.O> and a
disappointing update from Dutch group ASML <ASML.AS>
                                
 By 0914 GMT, the FTSEurofirst 300 index <.FTEU3> of top
European shares was down 1.05 percent at 1,380.69 points, having
earlier hit its lowest level since September 2006 at 1,376.35,
and is now showing a loss of nearly 9 percent for the year.
                                
 The index lost 2.6 percent on Tuesday after U.S. investment
bank Citigroup <C.N> posted a record $10 billion quarterly loss,
cut its dividend and said it would receive a capital injection
of $14.5 billion. A surprise fall in retail sales added to the
view the U.S. economy may be heading for recession.
                                
 "It looks like markets are now realising that the credit
crisis in the United States is far away from being over and
there are further risks arising that are further down the
chain," said Heino Ruland, a strategist at FrankfurtFinanz in
Frankfurt.
                                
 Declining issues on the FTSEurofirst 300 outnumbered
advancers by about six to one.
                                
 HSBC <HSBA.L> was once again the biggest negative weight on
the index, falling 2.5 percent, while Commerzbank <CBKG.DE> shed
nearly 6 percent and Barclays <BARC.L> fell 2.7 percent.
                                
 Tech stocks came under pressure after earnings from Intel
<INTC.O> missed forecasts and the company issued a dour outlook
on Tuesday, while in Europe, ASML <ASML.AS> -- which supplies
most of the world's top chip makers -- fell by more than 10
percent after reporting a recovery in quarterly unit orders but
an unexpected fall in order value.
                                
 ASML was the biggest percentage loser in early trade and its
shares were on course for their largest one-day fall since late
December 2002. Volume equalled the average seen for a full day's
trade over the past 30 days.
                                
 Shares in Germany's Infineon <IFXGn.DE> fell 4.2 percent.
                                
 
                                
 MORE RESULTS COMING
                                
 After Tuesday's twin bombshells of Citigroup's record loss
and a shock fall in monthly U.S. retail sales, investor
attention will be pinned on results from JPMorgan Chase <JPM.N>
and Wells Fargo <WFC.N>.
                                
 The data calendar includes consumer price inflation due at
1330 GMT and industrial production at 1415 GMT.
                                
 "Like yesterday, the main focus in the market is likely to
be on U.S. bank reports, with JPMorgan and Wells Fargo reporting
today, rather than the US data," wrote Bear Stearns analysts in
a note.
                                
 "What's more, the main data release today, the U.S. CPI, is
not really a number that moves the currency market very much.
Many will suggest that it is not going to be a number that moves
the Fed either as the bank seems to be content to allow this
rise in prices in its efforts to shore up growth," they said.
                                
 Evidence of slowing economic growth outside the United
States and beyond the housing market has raised fears that the
credit crisis will have a broader impact than originally
thought.
                                
 The Baltic Exchange's major sea freight index <.BADI> for
seaborne dry commodities trade on Tuesday showed its
second-largest drop since records began in 1985.
                                
 Many use this index as a gauge of global economic strength
and its 34-percent decline in the past two months alone has
added to concerns among investors that the weakness in the U.S.
economy may snowball into a widerspread slowdown.
                                
 In the commodities sector, shares in Rio Tinto shares fell
nearly 4 percent after a trading update from the company, which
is fighting a takover approach from rival BHP Billiton <BLT.L>.
                                
 Vedanta Resources <VED.L> lost 3 percent, while Antofagasta
fell 3.2 percent and Xstrata <XTA.L> fell 4.1 percent.
                                
 Around Europe, London's FTSE 100 index <.FTSE> fell 1.3
percent, while Frankfurt's DAX <.GDAXI> dropped 1.0 percent and
Paris' CAC 40 <.FCHI> lost 1.1 percent.
                                
 Defensive stocks were once again in positive territory, with
utilities, drugmakers and food producers the top three positive
influences on the broader market.
                                
 Germany's E.ON <EONG.DE> was the top weighted gainer, rising
1.5 percent, while among the drugmakers Sanofi-Aventis
<SASY.PA>, AstraZeneca <AZN.L> and GlaxoSmithKline <GSK.L> were
all up between 0.5 and 2.2 percent.
                                
 Food group Unilever <ULVR.L> was among the top ten positive
weights, rising 1.9 percent.
                                
 (Editing by Rory Channing)