* FTSEurofirst 300 falls 0.7 pct
* Gloomy U.S. homebuilder sentiment adds to recovery jitters
* International Power surges on M&A hopes
By Harpreet Bhal
LONDON, July 19 (Reuters) - European shares fell on Monday
after gloomy U.S. housing data rekindled worries about the pace
of economic recovery, more than offsetting positive mergers and
acquisitions sentiment, led by International Power <IPR.L>.
Challenges to economic recovery were reinforced by data
showing that U.S. home-builder sentiment fell more-than-expected
in July to the lowest level in more than a year after a popular
home-buyer tax credit expired in April. []
The pan-European FTSEurofirst 300 <> index of top
shares closed 0.7 percent lower at 1,006.26 points.
The index has shed around 3.7 percent since Thursday as
disappointing economic data released over the last three
sessions heightened jitters over the pace of economic recovery.
So far in July the index is still up 1.3 percent, on track for
the first month of gains since March.
"If economic data continues to underperform, there is
potential for us to slip into a double-dip recession and that is
the fear," Joshua Raymond, market strategist at City Index said,
adding that low volumes could be exaggerating the market's
moves.
Optimism over a pickup in M&A activity helped provide some
support to the index. International Power surged 10.5 percent
percent after confirming it has revived talks with France's GDF
Suez <GSZ.PA>, which rose 0.7 percent. []
In a related M&A move, British engineering company Tomkins
<TOMK.L> soared 27.8 percent after the firm said it had received
a bid approach at 325 pence per share from a consortium of Onex
<OCX.TO> and the Canada Pension Plan. []
Heavyweight banking stocks were mostly lower, with Irish
lenders Bank of Ireland <BKIR.I> and Allied Irish Banks <ALBK.I>
off 4.4 and 3.5 percent, respectively, stung by ratings agency
Moody's move to downgrade Ireland's sovereign bond rating by one
notch to Aa2 earlier on Monday. []
Meanwhile, the IMF and EU suspended on Saturday a review of
Hungary's funding programme, set up in 2008 to save the country
from financial meltdown, saying it must take tough action to
meet targets for cutting its budget deficit.
Hungary's biggest bank OTP <OTPB.BU> and the foreign lenders
most geared to the country, Austria's Erste Group Bank <ERST.VI>
and Raiffeisen International <RIBH.VI>, were down 1.1 to 5.6
percent.
Ahead of the outcome of the European banks' stress tests due
on Friday, bankers and officials in Greece, Spain and Belgium
joined a chorus of countries expecting their banks to pass the
stress tests, although doubts linger over whether the health
checks are tough or transparent enough. []
BP SLIPS
BP <BP.L> shed 4.7 percent as investors fretted about
possible seepage from its capped Gulf of Mexico well, and as
speculation grew about assets the company may sell to pay
multibillion dollar costs for its oil spill. []
With the corporate earnings season in full swing in the
U.S., investors are expected to scrutinise company results for
further direction for equities. After the closing bell,
technology bellwether International Business Machines Corp
<IBM.N> will report results.
Among other decliners in Europe, Electrolux <ELUXb.ST> fell
7.8 percent after the world's second-biggest home appliances
maker missed earnings forecasts in the second quarter.
[]
Across Europe, Britain's FTSE 100 <>, Germany's DAX
<> and France's CAC 40 <> fell 0.2 to 0.5 percent.
(Editing by Simon Jessop)
