By Eva Kuehnen
FRANKFURT, Feb 29 (Reuters) - Financials led European shares lower on Friday as investor concern grew over the outlook for economic growth, prompting a safe-haven switch into the telecoms and food and drinks sectors.
Swiss Re <RUKN.VX>, the world's largest reinsurer, was among the few gainers in the financial sector, rallying 4.4 percent after its results beat expectations and the company raised its dividend.
Banks were the worst performers. The DJ Stoxx European banking index <.SX7P> fell 1.2 percent with UBS <UBSN.VX> down 3.7 percent, HBOS <HBOS.L> dropping 2.8 percent and Royal Bank of Scotland <RBS.L> down 1.5 percent.
By 1015 GMT, the pan-European FTSEurofirst 300 index <
> was down 0.4 percent at 1,328.29 points. The index declined 1.8 percent on Thursday and has lost 11.5 percent since the beginning of the year.U.S. and Asian stock markets fell after a warning from Federal Reserve Chairman Ben Bernanke that some small U.S. banks could fail, heightening fears of a recession in the world's largest economy.
"Bernanke scared us quite a bit yesterday with his warning about bank failures. And that continues to have an effect today," one Frankfurt-based trader said.
"Everyone is cautious ahead of the weekend. No one wants to take risks, particularly ahead of important U.S. data like the University of Michigan consumer sentiment index and the Chicago PMI index later this afternoon," he added.
The Reuters/University of Michigan consumer sentiment index is due at 1455 GMT. Another reading of confidence earlier this week showed U.S. consumer sentiment hit a five-year low in February.
The Chicago PMI index, which measures business activity in the auto-intensive Midwest region, is due at 1445 GMT.
Swiss Re's results came a day after the world's largest insurer American International Group Inc <AIG.N> posted its biggest-ever quarterly loss.
Germany's Allianz <ALVG.DE> was one of the strongest drags on Germany's top-30 DAX index <
>, falling 1.8 percent and Assicurazioni Generali <GASI.MI>, Europe's number-three insurer, dropped 1.5 percent.But Austria's Erste Bank <ERST.VI> gained 4.5 percent after central Europe's second-biggest lender beat forecasts with a 22 percent rise in fourth quarter net profit.
Germany's DAX fell 0.3 percent and was the weakest performer among its European counterparts, with Britain's FTSE 100 index <
> and France's CAC 40 < > both down 0.2 percent.Oil companies rose as crude futures <CLc1> touched a new high above $103. BP <BP.L> added 0.5 percent and was among the strongest positive weights on the European benchmark index.
Reflecting a drop in investor risk appetite, shares in telcoms and food and beverage companies were among the main gainers.
The DJ Stoxx European telecoms index <.SXKP> rose 0.7 percent and the DJ Stoxx European beverage index <.SX3P> added 0.5 percent.
Societe Generale strategists said in a note to clients about the food and beverage sector: "Despite strong soft commodities inflation, we appreciate the defensive qualities of the sector, which has demonstrated its pricing power and do not think that valuations are too stretched yet."
Elsewhere, shares in Belgian chemicals, plastics and drug maker Solvay <SOLB.BR> dropped 3.3 percent after U.S. peer Wyeth Pharmaceuticals <WYE.N> ended collaboration on would-be blockbuster schizophrenia drug bifeprunox. (Editing by David Cowell)