By Blaise Robinson PARIS, Nov 12 (Reuters) - European stocks dropped in early trade on Friday, losing ground for the third straight session, hurt by escalating fears over Ireland's debt problems that also dragged the euro to a six-week low versus the dollar. At 0909 GMT, the FTSEurofirst 300 index of top European shares was down 1.3 percent to 1,094.69. The Euro STOXX 50, the euro zone's blue chip index, dropped 1.5 percent to 2,787.54, running into strong support as it neared its 200-day moving average around 2,760. European Union leaders sought to ease concerns about Ireland's ability to pay its debt on Friday. They said at a Group of 20 leaders' summit in Seoul that if any EU state's debt were to be restructured, investors would not be forced to take a writedown on the value of bondholdings. "The CDS market has been sending warning signals on Ireland for a while, but the contagion to stocks has taken some time. Here it is now," Louis Capital Market analyst Jacques Henry said. "There has been an excess of optimism in equities lately and the market was ripe for a correction. But, all in all, recent data shows inflows into the asset class have been brisk and the pullback will be seen as a good opportunity to buy." Ireland's ISEQ, Italy's FTSE MIB, Portugal's PSI20 and Spain's IBEX 35 dropped 0.7-1.1 percent, while the Thomson Reuters Peripheral Eurozone Countries Index fell 1 percent to a six-week low. That compared with two-year highs earlier this week by the FTSEurofirst 300, Britain's FTSE 100 and Germany's DAX . The VDAX-NEW volatility index, Europe's main fear gauge, rose 5 percent on Friday, highlighting a drop in investor appetite for risk. Banking stocks featured among the top losers, with Bank of Ireland down 4.2 percent, Dexia down 2.3 percent, and Deutsche Bank down 2 percent. "The knives will be out for any bank with exposure in the Emerald Isle as it is difficult to imagine that much in the way of central bank sympathy will be extended to such institutions," Simon Denham, head of Capital Spreads, said in a note. Europe's STOXX banking index, down 5 percent in a week, is down 7.7 percent so far this year to be Europe's second worst sector performance, after utilities. Mining stocks also took a beating on Friday as talk of a possible Chinese interest rate hike spurred profit taking in commodity prices. Xstrata was down 4.3 percent and Anglo American down 4 percent. Despite Friday's 3.7 percent pullback, the STOXX basic resources index was still up 17 percent in 2010. Investors were also digesting the outcome of the G20 meeting at which leaders agreed to indicative guidelines on global imbalances and left the detail to be discussed next year. (Editing by Dan Lalor) Keywords: MARKETS EUROPE STOCKS ============================================================= For rolling updates on what is moving European shares please click on ============================================================= For pan-Europeanmarket data and news, click on codes in brackets: European Equities speed guide................... FTSEurofirst 300 index.............................. DJ STOXX index...................................... Top 10 STOXX sectors........................... Top 10 EUROSTOXX sectors...................... Top 10 Eurofirst 300 sectors................... Top 25 European pct gainers....................... Top 25 European pct losers........................ Main stock markets: Dow Jones............... Wall Street report ..... Nikkei 225............. Tokyo report............ FTSE 100............... London report........... Xetra DAX............. Frankfurt market stories CAC-40................. Paris market stories... World Indices...................................... Reuters survey of world bourse outlook.......... Western European IPO diary........................... European Asset Allocation......................... Reuters News at a Glance: Equities............... Main currency report:............................... Keywords: MARKETS EUROPE STOCKS/ =2 (blaise.robinson@reuters.com ; +33 1 4949 5269, Reuters Messaging: blaise.robinson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.
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