Europe's Markets Fall Monday at Mid-Day as EU Deal Enthusiasm Ebbs

(REUTERS) - European shares retreated on Monday as enthusiasm faded over a European Union deal on greater fiscal integration, with the market unconvinced that the EU has done enough to provide immediate relief to the Eurozone's indebted countries.

Banks and insurers, which have the greatest exposure to Eurozone debt, fell more than two percent, giving up most of the gains made on Friday, when EU leaders agreed to pursue stricter budget rules and provide up to 200 billion euros ($264 billion) in bilateral loans to the International Monetary Fund.

At mid-day Monday, London's FTSE 100 were down 45 points to 5,484, Germany's DAX plunged 134 points to 5,853 and France's CAC plummeted 55 points to 3,117.

This is all very good but they didn't do anything about addressing the lack of growth in these economies or their pile of debt, which is only going to take time, Andrea Williams, manager of Royal London Asset Management's European Income fund, said.

Williams, whose fund has around 359 million pounds under management across continental equities, kept her cautious stance after the EU announcement, with an underweight stance on banks and an overweight on defensives such as healthcare stocks , which rose 0.8 percent by midday, and telecoms, flat on the day.

However, the fund manager said she would be prepared to review her stance if the European Central banks agreed to intervene on the monetary and sovereign fronts to avert the prospect of a liquidity squeeze.

The market wants the ECB either to print money or buy bonds aggressively, and this hasn't happened. I wonder what they (the ECB) need to see, she noted.

The ECB cut its interest rate to one percent last week, but president Mario Draghi made clear the central bank would not launch a quantitative easing programme.

Analysts were also calling for the central bank to step in, noting the effects of a credit crunch on the economy would be exacerbated by austerity measures across the Eurozone.

It looks like investors are waiting for some concrete news out of European leaders before they are prepared to commit more cash to equities and, frankly, that seems like a sensible stance, Charles Stanley said in a note.

The broker set 1,002 points resistance level for the FTSEurofirst 300, with a key support is in the region of 960 points.

In a further sign the Eurozone debt crisis was already taking its toll on growth, the Organisation for Economic Cooperation and Development said on Monday all major economies are losing momentum with economic activity across OECD countries at its weakest in two years.

At 12:39 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 980.65 points, although trading was choppy due to light volumes, as well as options and futuresexpiry on Friday.

The index was trading at less than a third of its 90-day volume average, in a sign some investors had already withdrawn from the markets ahead of the holiday season.

The majority of investors are desperately trying to do nothing. They have very low risk positioning and want to maintain it, Andy Ash, head of sales at Monument Securities, said.