* FTSEurofirst 300 falls 2.2 pct
* Risk appetite down, volatility index hits 14-month high
* Concerns about tougher regulation hit financial stocks
* Technicals bearish; market vulnerable to deep correction
By Atul Prakash
LONDON, May 20 (Reuters) - European shares fell for a second
session on Thursday to a two-week closing low, with poor U.S.
economic numbers and growing anxiety over possible tougher
regulation in the eurozone unsettling investors.
Financial shares were hit hard, with the STOXX Europe 600
banking index <.SX7P> falling 1.9 percent. Miners also came
under pressure as metals prices slipped on concerns about demand
for industrial metals, especially in the developed world. The
European basic resources index <.SXPP> was down 4.2 percent.
Standard Chartered <STAN.L>, HSBC <HSBA.L>, Barclays
<BARC.L>, Lloyds <LLOY.L>, Royal Bank of Scotland <RBS.L>, BNP
Paribas <BNPP.PA>, Societe Generale <SOGN.PA>, Credit Agricole
<CAGR.PA> and Natixis <CNAT.PA> fell 0.5 to 3.1 percent.
The FTSEurofirst 300 <> index of top European shares
finished 2.2 percent down at 974.80 points, its lowest close
since May 7, after falling to a two-week low of 959.44 earlier
in the session. The index is down 6.8 percent for 2010, but is
still up 51 percent since hitting a record low in March last
year.
"There are concerns that Europe is not speaking with one
voice and that there may be stiffer regulation coming through,"
said Klaus Wiener, head of research at Generali Investments.
"Also hurting the market is growing fear that global
economic growth will suffer at some point because of
bigger-than-needed fiscal consolidation."
Germany said restoring confidence in the euro was its top
priority, demanding tougher regulation and oversight to protect
the single currency.
The euro fell to trade near Wednesday's four-year lows,
staying vulnerable on concerns that other European countries may
announce regulations similar to Germany's ban on naked short
selling of some stocks and bonds.
Analysts fear the drive to restore fiscal balances will slow
down economies in the European Union just as they recover from
the sharp global downturn. Greece has been forced to impose
drastic austerity measures, while Spain and Portugal have also
embarked on painful public spending cuts.
Appetite for risky assets fell, with the VDAX-NEW volatility
index <.V1XI> surging to 14-month highs. The higher the index,
which is based on sell and buy options on Frankfurt's top-30
stocks <0#.GDAXI>, the lower the market's desire to take risk.
"Leading indicators are likely to head lower for the next
couple of months on the back of all the austerity measures that
have been announced over the last couple of weeks and on the
impact this will have on growth," said Gerhard Schwarz, head of
global equity strategy at UniCredit in Munich.
CHARTISTS BEARISH
Chartists painted a bleak picture.
"Our sort-term outlook is bearish," said Michael Riesner,
head of equities technical analysis at UBS Investment Bank.
He said the FTSEurofirst 300 had a minor support at 967
points -- an eight-month closing low in early May -- and a break
of the level could trigger a deeper correction towards 890,
which is the 50 percent Fibonacci retracement of its rise from a
record low in March last year to a high in mid-April of 2010.
U.S. data also dampened market sentiment. The Labor
Department said the number of U.S. workers filing new
applications for unemployment benefits unexpectedly rose last
week, while the Conference Board said its index of leading
economic indicators slipped 0.1 percent last month.
Miners felt the pressure of a broader market sell-off, with
BHP Billiton <BLT.L>, Anglo American <AAL.L>, Antofagasta
<ANTO.L>, Rio Tinto <RIO.L>, Xstrata <XTA.L> and Eurasian
Natural Resources <ENRC.L> falling 2.2 to 5.9 percent.
Among individual stocks, SABMiller <SAB.L> sank 6 percent
after saying it expected a recovery in consumer spending only
towards the end of 2010 and reported a 17 percent rise in annual
earnings which narrowly missed consensus forecasts.
About 448 million shares changed hands on the FTSEurofirst
300, representing 157 percent of its 90-day daily average
volume. The average daily volume in 2009 was 253 million shares.
Across Europe, Britain's FTSE 100 index <>, Germany's
DAX <> and France's CAC 40 <> fell 1.7-2.3 percent.
(Editing by Erica Billingham)
