* FTSEurofirst 300 down 1.5 percent
* Banks fall on renewed worries over U.S. capital hikes
* Swine flu fears take toll on miners, industrials
* U.S. consumer confidence pulls markets off lows
By Peter Starck
FRANKFURT, April 28 (Reuters) - European shares lost ground
on Tuesday but closed off intra-day lows as surprisingly strong
U.S. consumer confidence data took some of the edge off fears
linked to swine flu and U.S. banks' capital needs.
The FTSEurofirst 300 <> index of top European shares
ended 1.5 percent lower at 801.24 points, clawing back some
earlier losses that saw the benchmark sink as much as 2.6
percent.
The recovery came in the wake of data showing U.S. consumer
confidence rising in April to the highest level since November
[]. Wall Street's leading indexes, which had opened
lower, turned into positive territory, pulling Europe along.
"That was the trigger," said Giuseppe-Guido Amato, equities
strategist at brokerage Lang & Schwarz.
"It is one small stone in the mosaic, another sign of a
moderate stabilisation but it is by no means a sign of any
distinct turnaround. We are not out of the woods yet," he said.
Tuesday's slide left the FTSEurofirst 300 index 22 percent
above this year's low point set on March 9 and Amato said stock
markets were showing resilience in the face of a potential swine
flu pandemic, news of which hit financial markets on Monday.
"The market is range-bound but in an upward trend, showing
underlying strength despite the swine flu," he said.
"Investors are aware that it (a potential pandedmic) is a
danger but the problem is that nobody knows ... what is for sure
is that we really don't need one, it could be a catastrophe for
the market," Amato added.
The World Health Organization raised its alert level to
'Phase 4', indicating increased risk of a pandemic.
Credit Suisse in a global equity strategy note drawing
parallels with the 2003 SARS outbreak and avian flu, said stock
markets could fall 10 percent to 15 percent "if concerns rose to
SARS type levels, which we believe is very unlikely".
Goldman Sachs, too, saw scant effects for markets. "The
impact will likely be relatively limited unless the source of
concern extends meaningfully beyond Latin America," it said in a
research note.
Banks sliced most points off the European benchmark index
followed by mining and industrial engineering stocks, both
latter sectors on fears that a swine flu outbreak might prolong
the global recession.
BILLIONS IN FRESH CAPITAL
Financials, which have had an even stronger run than the
broader market since early March, sold off on news that U.S.
regulators are talking to Citigroup Inc <C.N> about its capital
levels after stress testing the bank, and a Wall Street Journal
report that Bank of America Corp <BAC.N> may need billions in
fresh capital. []
"It's not really a surprise. That some banks need to
strengthen their capital base has been flagged by (Timothy)
Geithner and (Ben) Bernanke," Amato said, referring to the U.S.
Treasury Secretary and Federal Reserve Chairman, respectively.
"It shows that the problems are not out of the way yet," he
said.
The importance of the U.S. bank stress tests was underscored
by fund management company Garmignac Gestion, which said in a
strategy note: "The (stock) markets will not be able to pick up
without a prior recovery of the (U.S.) banks".
In Europe on Tuesday Deutsche Bank's <DBKGn.DE> shares fell
6.9 percent although Germany's biggest bank reported stronger
than expected first-quarter earnings as debt trading windfall
profits offset a loss in its wealth management arm and a retail
banking profit dip.
BBVA <BBVA.MC> dipped 2.1 percent -- outperforming the DJ
Stoxx banks index <.SX7P>, which lost 2.6 percent -- after
Spain's second-largest bank unveiled a 14 percent dip in net
profit in the first three months of the year as bad loans rose.
"Some banks appear to have returned to sustainable
profitability while some have yet to move through their losses,"
Fox-Pitt Kelton said in a European banks research note.
"This makes the disparities between stocks as wide as they
can be and will be a critical investment theme over the coming
year," Fox-Pitt Kelton added.
Among miners, Rio Tinto <RIO.L> fell 6.3 percent and Anglo
American <AAL.L> ended down 5.6 percent. Copper prices <MCU3>
remained near three-week lows and gold <XAU=> fell below $900.
Steelmaker ArcelorMittal <ISPA.AS> dropped 6.1 percent and
engineering group ABB <ABBN.VX> fell 5.1 percent.
Some travel stocks took a beating on swine flu related
jitters. British Airways <BAY.L> was down 5.4 percent and cruise
operator Carnival <CCL.L> fell 2.5 percent, both stocks adding
to Monday's losses.
Selected luxury groups also suffered, with Richemont
<CFR.VX> down 4.9 percent and LVMH <LVMH.PA> down 2.9 percent.
Among drugmakers, some of which were boosted by an expected
rise in flu drug sales, Roche <ROG.VX> gained 1.4 percent.
On the sector level, traditional defensives such as tobacco,
beverages and household goods were among the scarce winners.
(Additional reporting by Blaise Robinson in Paris and Brian
Gorman in London; Editing by Greg Mahlich)
