* FTSEurofirst 300 ends 0.9 pct lower
* Banks biggest negative weight as credit worries persist
* Rising oil ignites inflation worry, but lifts energy stocks
By Sitaraman Shankar and Eva Kuehnen
LONDON/FRANKFURT, Aug 21 (Reuters) - European shares fell to
their lowest close since Aug. 4 on Thursday, pressured by
persistent financial sector worries and a rising oil price,
which reignited inflation fears.
Commodity stocks limited losses as miners tracked higher
metal prices and heavyweight energy shares gained from the rise
in crude.
The FTSEurofirst 300 <> index of top European stocks
ended down 0.9 percent at 1,154.72 points.
HSBC <HSBA.L> was the biggest negative weight on the index,
falling 2.7 percent, while Santander <SAN.MC>, BNP Paribas
<BNPP.PA>, Royal Bank of Scotland <RBS.L> and ING <ING.AS> all
fell more than 2 percent.
Investors continued to fret about the financial sector,
battered by the credit crisis stemming from a collapse in the
U.S. subprime mortgage market.
"The focus remains on the financial crisis. There is still a
lot of uncertainty. The hope for stabilisation gets postponed
from quarter to quarter and the overall market can't recover
until there is clarity," said David Pieper, strategist at German
bank LBBW.
"As long as the financial sector declines ... the overall
market can't play a different tune."
Fears about financial stocks centred on major investment
banks cutting outlooks for other investment banks. They forecast
more writedowns at Wall Street firms including Lehman Brothers
<LEH.N> and Goldman Sachs <GS.N>.
Traders said that a report in the Financial Times on Lehman
Brothers further undermined sentiment.
The FT said the beleaguered U.S. investment bank had held
talks on a sale of up to half its shares with China's CITIC
Securities as well as with state-owned Korea Development Bank
(KDB), but both investors walked away saying the price was too
high. CITIC Securities <600030.SS>, China's biggest brokerage,
said it had held no formal talks about buying a stake in Lehman.
The FTSEurofirst has fallen 23 percent so far this year, and
is on track for its ninth month of losses in ten.
COMMODITY SURGE
Oil <CLc1> jumped $5 a barrel to near $121 on geopolitical
tensions and the dollar's slide and concern that Tropical Storm
Fay might yet threaten energy infrastructure in the Gulf of
Mexico.
BP <BP.L> and Royal Dutch Shell <RDSa.L> rose 1.2 percent
and 1.7 percent respectively.
And mining stocks Anglo American <AAL.L>, Rio Tinto <RIO.L>,
and BHP Billiton <BLT.L> notched up gains of 3-4 percent as gold
hit a 10-day high.
Defensive drug stocks, which had gained from a sell-off in
commodities in recent weeks, fell, led by France's
Sanofi-Aventis <SASY.PA> which lost 3.6 percent.
Airline stocks took a hammering on the higher oil price,
with Air France KLM <AIRF.PA> down 3.8 percent, British Airways
<BAY.L> down 3.3 percent and Lufthansa <LHAG.DE> off 2.5
percent.
Across Europe, Britain's commodity-heavy FTSE 100 <>
ended flat, while Germany's DAX <> lost 1.3 percent and
France's CAC <> fell 1.4 percent.
"The equity markets continue to trade in an environment of
weak growth and high inflationary pressure, with negative
ramifications for corporate profits," UniCredit strategist Tammo
Greetfeld wrote in a note.
(Reporting by Sitaraman Shankar in London and Eva Kuehnen in
Frankfurt; editing by Rory Channing)
