European shares fall early, weighed by banks

LONDON, July 18 (Reuters) - European shares slipped in early trade on Friday, as banks fell after disappointing results from Merrill Lynch (MER.N: Quote, Profile, Research) overnight and heavyweight oils lost ground as crude traded well away from recent highs. The FTSEurofirst 300 fell 0.7 percent to 1,137.83 points, but was on track to eke out a gain of just under 1 percent for the week thanks to a jump on Thursday.

Fortis (FOR.BR: Quote, Profile, Research) was down 2.4 percent, Societe Generale (SOGN.PA: Quote, Profile, Research) down 1.3 percent, UBS (UBSN.VX: Quote, Profile, Research) down 1.5 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research) down 1.2 percent.

On Wall Street, shares in JPMorgan (JPM.N: Quote, Profile, Research) jumped after its results pleased investors but Merrill Lynch (MER.N: Quote, Profile, Research) fell in extended trade after a bigger-than-expected loss, sending mixed signals about a banking sector battered by a credit crisis.

Citigroup (C.N: Quote, Profile, Research) is due to report later in the session.

Analysts said that despite Merrill, results from banks had not been as bad as feared, and relief from surging crude prices would also help equities.

"It's difficult to derive a general picture on the bank results, but one could say they are more reassuring than not," said Thierry Lacraz, strategist at Swiss bank Pictet.

"The results from Citigroup will be key because it is probably the most exposed to risky assets among the large banks."

"We continue to be underweight on the banking sector, but it will be a positive for financials, consumer stocks and the broad market if the oil price goes to $120."

Oil traded at $131 a barrel, up on the day but a long way off its peak above $147. Oil stocks BP (BP.L: Quote, Profile, Research), Royal Dutch (RDSa.L: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) were off 0.7-1.0 percent.

(Reporting by Sitaraman Shankar)