UPDATE 2-Oil majors, banks drive European shares from 3-week high


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 (For a live blog on European stocks, type LIVE/ in an Eikon
news window)
    * STOXX led lower by banks, energy, tobacco companies 
    * Defensives provide support, led by media stocks 
    * Axel Springer hits more than 9-mth high on KKR's offer

 (Updates to close)
    By Sruthi Shankar
    June 12 (Reuters) - Weakness in oil companies and banks
halted a week long rally in European shares on Wednesday, as
soft Chinese factory activity data and Washington's tough stance
on trade talks with Beijing prompted investors to cash in some
of June's gains.
    Defensive sectors such as media  .SXMP , healthcare  .SXDP  
 and telecoms  .SXKP  helped Europe's pan-regional STOXX 600
 .STOXX  bounce off early lows. The index closed down 0.3%
before falling as much as 0.67%.
    Also helping to cushion some of the losses were increasing
bets of an interest rate cut by the Federal Reserve as early as
next month after U.S. data showed inflation barely rose in May.
    Expectations of looser monetary policy from the major
central banks to counter a global growth slowdown have supported
risk assets.
    The STOXX 600 had gained 4.5% this month, reversing most of
a sell-off in May that was its worst monthly performance in more
than two years.
    "The risk rally seems to be running out of steam, and there
appears to be little room for further upside," strategists at
Morgan Stanley wrote.
    "Reports suggest both the U.S. and China have done limited
preparatory work for the upcoming G20 leaders meeting as the
trade negotiating teams on both sides have not met since talks
ended at an impasse on May 10. This suggests a reduced
likelihood of a trade resolution."
    President Donald Trump said on Tuesday he would hold up a
trade deal with China unless it agrees to four or five major
points, reheating tensions between the two sides.
 urn:newsml:reuters.com:*:nL2N23I153 urn:newsml:reuters.com:*:nL2N23D13K
    The biggest faller was Europe's oil and gas index  .SXEP ,
down 2.2%, as the commodity's price took a hit from an
unexpected rise in U.S. crude inventories and by a weaker
outlook for global demand.  O/R  
    Banking stocks  .SX7P , which tend to suffer when
expectations for interest rates fall, lost 1.1%.
    London-listed shares of Asia-focused banks Standard
Chartered  STAN.L  and HSBC  HSBA.L  dropped as protests in Hong
Kong against an extradition bill that would allow people to be
sent to mainland China for trial descended into violent chaos.
    Italy's FTSE MIB  .FTMIB  fell 0.7% and its banking index
 .FTIT8300  dropped 1.5% as the European Union moved closer to
taking disciplinary action over the country's growing
debt. urn:newsml:reuters.com:*:nL8N23I0JN
    Chipmakers, which get a huge portion of their revenue from
China, fell, with AMS AG  AMS.S  and STMicroelectronics  STM.MI 
declining 3.5% and 1.8%, respectively.
    Axel Springer  SPRGn.DE  jumped 11.5% to touch a nine-month
high after funds controlled by U.S. private equity investor KKR
 KKR.N  offered to buy out minority shareholders of the German
publisher for 63 euros a share, a 40% premium to its market
price.  urn:newsml:reuters.com:*:nASP0012UH
    World's No. 2 tobacco company British American Tobacco
 BATS.L  fell 4.4% after it warned of steeper declines in
cigarette sales globally mainly due to waning demand in its main
U.S. market  urn:newsml:reuters.com:*:nL4N23J1J7
    Shares in Belgian retailer Colruyt  COLR.BR  fell 5.7% to
the bottom of the STOXX 600 after Goldman Sachs put a "sell"
rating on the stock.  
    Dublin's ISEQ  .ISEQ , which typically falls on fears of a
disorderly Brexit, ended down 1.5% to post its biggest
percentage fall in two weeks.
    British lawmakers defeated an attempt led by the opposition
Labour Party to try to block a no-deal Brexit by seizing control
of the parliamentary agenda from the government.  urn:newsml:reuters.com:*:nL9N21G03F
    Boris Johnson, the frontrunner for Prime Minister Theresa
May's role, has said he would be willing to take the country out
at the end of October, even if it meant leaving without a deal.

 (Additional reporting by Amy Caren Daniel and Susan Mathew in
Bengaluru; editing by Patrick Graham and Jane Merriman)
 ((Amy.CarenDaniel@thomsonreuters.com ; within U.S.
+1-646-223-8780; outside U.S. +91 80 6749 9250 ; Reuters
Messaging: Amy.CarenDaniel.thomsonreuters.com@reuters.net;))

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