* STOXX 600 down 0.2 percent
* Banks lead sectoral fallers
* Deutsche Bank cuts banks, upgrades energy
* Aryzta falls after results, Ryanair up
(Adds details, updates prices)
By Danilo Masoni
MILAN, May 30 European shares fell slightly on
Tuesday, with banks leading the decline on fresh political
jitters and following a downgrade by a top global broker.
The pan-European STOXX 600 index was down 0.2
percent by 0855 GMT following three straight days of losses.
Euro zone blue chips declined 0.5 percent, while
Britain's FTSE dropped 0.4 percent as it reopened
following a long weekend.
Euro zone banks fell 2 percent to its lowest level
in nearly two weeks after Deutsche Bank strategists downgraded
regional banking stocks' rating by one notch to "underweight".
In a note to clients, they said the sector was among the
most sensitive to swings in euro area growth, which they
expected to fade, and that prices were no longer compelling.
"There is no particular valuation support." they said.
Italian banking shares, hit in the past two sessions by
worries over early elections, were among the losers again on
Tuesday with UniCredit down 0.9 percent. Among other
euro zone bank heavyweights, Deutsche Bank fell 1.6
percent and Spain's Caixabank dropped 1.4 percent.
Barclays said it still expected Italy to hold elections next
year, even though chances of a snap vote had risen
substantially, with non-negligible risks that anti-establishment
parties could win.
"We expect volatility in Italian and periphery assets to
increase in coming weeks and to remain driven by electoral
polls," they said in a note.
In spite of weakness seen over the past sessions, the STOXX
benchmark is set to end May in positive territory, near two-year
highs and scoring its fourth straight month of gains.
Yet as the recent run loses momentum, investors have started
to reshuffle their portfolios, seeking fresh catalysts as a
surprisingly strong earnings season draws to an end.
While Deutsche Bank has cut banks, recommending that
investors buy sectors such as energy and construction, JPMorgan
strategists downgraded autos to neutral saying they now favoured
defensive sectors such as utilities and telecoms.
Among the biggest movers, Swiss food group Aryzta
fell 2.8 percent after reporting flat revenues and
saying it could not provide any forward guidance.
Shares in paint maker Akzo fell 1.5 percent as
chances of a takeover by US rival PPG slimmed after a court
rejected a request by dissident investors to take action against
the Dutch group over its rejection of the takeover.
In the UK, shares of British Airways owner IAG fell
2.8 percent on the first day of trading following massive
weekend disruption to flights due to an IT outage.
Elsewhere among airlines, Ryanair edged up 0.3
percent after Europe's biggest carrier by passengers reported a
record annual profit that was in line with market expectations.
(Reporting by Danilo Masoni; Editing by Mark Trevelyan)