* Banks decline as writedown woes resurface
* Techs drop on market talk ASML to lower guidance
* Steel, utilities gain on M&A talk
By Patrizia Kokot
LONDON, June 19 (Reuters) - European shares ended lower on
Thursday, pulled down by weaker banks and tech stocks on
concerns of further writedowns at HBOS and market talk of
lowered guidance at chip equipment maker ASML <ASML.AS>.
A weaker-than-expected reading of the Philadelphia Fed
survey further weighed on stocks, as did a comment from
Citigroup <C.N> Chief Financial Officer Gary Crittenden at an
investor conference that the bank could have substantial
writedowns in the second quarter.
"It's pretty grim. For a reasonable part of the United
States, the economic signals are not encouraging," said Stephen
Pope, chief global market strategist at Cantor Fitzgerald
Europe.
Pope said sectors with pricing power such as miners,
chemicals and some food producers offered better value for money
in this difficult market environment.
The FTSEurofirst 300 index <> of top European shares
ended down 0.5 percent at 1,244.77 points.
Banks were the largest decliners by weight with HBOS
<HBOS.L> shedding 7 percent after warning of a 1 billion pound
($2 billion) writedown in its first half, falling house prices
and rising arrears.
"There are some reassurances but enough uncertainty to limit
the likelihood of any material rebound in the share price over
coming weeks," Barclays Wealth said in a note on HBOS's trading
statement.
Other financials also came under pressure with Alliance &
Leicester <ALLL.L> down 5.3 percent and UBS <UBSN.VX> down 3.7
percent.
Santander lost 0.9 percent after three sources familiar with
the situation told Reuters that Spain's biggest lender was
considering a takeover bid for the Dresdner bank unit of insurer
Allianz <ALVG.DE>. Dresdner and Santander declined to comment.
Technology stocks fell sharply with the DJ Stoxx European
technology index <.SX8P> 2.2 percent lower amid market talk of a
profit warning at semiconductor equipment maker ASML, which
dropped 6.4 percent.
Traders pointed to speculation the company was lowering its
forecasts for gross profit margins to between 36 and 38 percent
from 40 percent. The company declined to comment.
Oil heavyweights Royal Dutch Shell <RDSa.L> and BP <BP.L>
lost over 1 percent as crude declined more than $2 a barrel
after China said it would raise gasoline and diesel prices.
Around Europe, Britain's FTSE 100 <> closed down 0.8
percent, Germany's DAX lost 0.1 percent and France's CAC fell
0.6 percent.
M&A TALK LIFTS STEEL, UTILITIES
Steel stocks were buoyed by renewed consolidation hopes
after South Korean rival POSCO <005490.KS> said it may invest in
Macarthur Coal <MCC.AX>, in which ArcelorMittal <ISPA.AS> has
also declared an interest.
ArcelorMittal rallied more than 4 percent with traders
noting that although the potential for a bidding war exists, the
probability is higher that ArcelorMittal will be able to take
over Macarthur, since it already owns a stake in it.
This would offer attractive synergies to the steel maker in
terms of vertical integration, analysts said.
Steel tube maker Vallourec <VLLP.PA> shot 6.2 percent higher
after Morgan Stanley reiterated its "outperform" rating and
raised the price target on the stock by 32 percent, pointing to
the group's ability to pass on higher raw material prices.
M&A chatter also lifted utilities with Spain's Gas Natural
<GAS.MC> up 1.5 percent after a Financial Times report that GDF
Suez <GAZ.PA> <LYOE.PA>, the French energy group to be created
next month, would join a bid for Gas Natural if asked by savings
bank La Caixa, which controls 35.5 percent of Gas Natural.
Repsol <REP.MC>, one of Gas Natural's biggest shareholders,
said it would not allow Gas to be sold to a rival.
(Editing by David Holmes)
