* FTSEurofirst 300 index down 1.3 pct
* Banks fall ahead of ECB rate decision
* Commods lower tracking weaker metal, crude prices
By Joanne Frearson
LONDON, July 2 (Reuters) - European shares were lower in
early trade on Thursday as investors took a cautious stance
ahead of U.S. non-farm payroll figures and the ECB rate
decision, with banks and commodities the biggest fallers.
By 0815 GMT, the pan-European FTSEurofirst 300 <>
index of top shares was down 1.3 percent at 854.87 points after
rising 1.8 percent in the previous session.
The benchmark index, which slumped 45 percent in 2008,
gained nearly 16 percent in the second quarter, its best
performance since late 1999.
Banks were among top losers on the index. Banco Santander
<SAN.MC>, Credit Suisse <CSGN.VX>, BNP Paribas <BNPP.PA> and
UniCredit <CRDI.MI> were down 0.9 to 1.6 percent.
"I do not think the ECB will do anything with interest rates
today. But, I am quite sure ECB President Jean-Claude Trichet
will effectively argue about the way the banks have been
handling cheap cash. Banks have not been passing it on to the
corporate sector or to private households," said Heino Ruland,
strategist at Ruland Research.
"Instead they have been gambling in corporate bonds and
using the money to restore profitability that they lost through
investing in asset-backed securities. I think Trichet will
question the banking sector on this. It is one of the reasons
why banks are not in the best shape," said Ruland.
Eighty one of 82 economists polled by Reuters forecast the
European Central Bank would leave the refinancing rate at 1.0
percent, and the Governing Council will probably repeat that
rates are appropriate at the current record low. []
COMMODITIES FALL
Energy stocks were the biggest losers after crude <CLc1>
fell 1.4 percent. BG Group <BG.L>, BP <BP.L>, Royal Dutch Shell
<RDSa.L> and Total <TOTF.PA> were down 0.9 to 1.5 percent.
Miners were in the doldrums as copper <MCU3=LX> fell 0.7
percent. Rio Tinto <RIO.L> slipped back 1.4 percent after its
$15.2 billion rights offer. []
Anglo American <AAL.L>, Antofagasta <ANTO.L>, BHP Billiton
<BLT.L>, Lonmin <LMI.L> and Eurasian Natural Resources
Corporation <ENRC.L> were down 0.8 to 3.6 percent.
Later in the session, investors are likely to focus on the
U.S. Employment report for June, due at 1230 GMT. Economists in
a Reuters survey forecast that 363,000 jobs were lost in the
month compared with a loss of 345,000 jobs in May.
"The non-farm payrolls are probably not necessarily going to
be good news. It is a lagging indicator so it is likely to
continue to get worse before it gets better," said Justin
Urquhart Stewart, director at Seven Investment Management.
Meanwhile, U.S. factory orders are released at 1400 GMT.
Economists in a Reuters survey expect orders to rise 0.8 percent
compared aith a 0.7 percent increase the prior month.
Across Europe, the FTSE 100 <> index was down 1
percent, Germany's DAX <> was 1.6 percent lower and
France's CAC 40 <> was down 1.3 percent.
(Reporting by Joanne Frearson; Editing by Hans Peters)
