European shares led lower by financials, D.Bank Q3

European shares fell for a second day on Wednesday, with financial stocks taking most points off the leading index after Deutsche Bank unexpectedly released quarterly figures that knocked its stock.

By 1032 GMT, The FTSEurofirst 300 .FTEU3 index of top European shares was down 0.7 percent at 1,013.75 points after falling 0.5 percent in the previous session.

The index, which hit a one-year high on Tuesday before falling, has gained 22 percent this year.

Deutsche Bank (DBKGn.DE) dropped 4 percent after Germany's biggest bank said tax credits had flattered net profit in the third quarter.

It is difficult to link the falling share price to the news that have been clearly positive. I would rather assume the falling share price is due to investors selling on good news, as bank shares have soared over the past months, said Heinz-Gerd Sonnenschein, equity strategist at Postbank.

Banks took most points off the index, with Standard Chartered (STAN.L), Lloyds (LLOY.L), Royal Bank of Scotland (RBS.L), BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA) down 1.2-3.3 percent.

Three sources close to the situation said Britain's regulator were moving closer to approving a plan by Lloyds to escape a costly government-backed scheme for bad debt.

Across Europe, Britain's FTSE 100 index .FTSE, Germany's DAX .GDAXIand France's CAC 40 .FCHI fell 0.7-1.2 percent.

It seems that while we may be heading out of a recession, the pace of recovery may be sluggish at best, and we could well see more profit-taking on the horizon, said Tim Hughes, head of sales trading at IG Index, in London.

FIAT DROPS, TELCOS GAIN

The DJ STOXX European Auto Index .SXAP was the biggest sectoral decliner, down 2.2 percent.

Peugeot (PEUP.PA) said third-quarter revenue slowed less sharply than in previous quarters, but analysts at Morgan Stanley analysts said sales were still disappointing. Shares in the company fell 5.9 percent.

What we have today is a revenue disappointment and no obvious sign of the large production re-ramp that many have anticipated, Morgan Stanley analysts said.

Fiat (FIA.MI) also dropped, down 3.5 percent after the company reported a better-than-expected third-quarter trading profit but said it might write off past investments.

European computer chip maker STMicroelectronics (STM.PA) fell 4.6 percent after it posted its seventh consecutive quarterly loss, but its revenue and outlook topped expectations and bolstered hopes the semiconductor industry was on the rebound. [ID:nN20458533]

On the positive side, telecom shares rose, with the DJ Stoxx European Telcom Index .SXKP the second-biggest sectoral gainer, up 0.4 percent. Deutsche Telecom (DTEGn.DE), Vodafone (VOD.L) and Telefonica (TEF.MC) rose 0.1-1.4 percent.

Later in the day, investors will focus on results expected frm Morgan Stanley (MS.N) and Boeing (BA.N).