* FTSEurofirst 300 down 0.1 percent
* Swiss currency move boosts exporters
* Broader backdrop still bearish, traders say
By Simon Jessop
LONDON, Sept 6 (Reuters) - European shares fell for a third
straight session on Tuesday in choppy trade, led by peripheral
euro zone banks as rising debt yields and an increasingly
fractious political backdrop to the region's debt crisis
continued to spook investors.
Swiss shares bucked the trend, boosted by Switzerland's
central bank intervening to drive down the value of the franc,
buoying exporters such as Transocean .
But elsewhere rising sovereign debt yields put peripheral
euro zone-exposed financials under the cosh, particularly in
Italy, where a new austerity package is being debated, driving
the FTSE MIB to a near two and a half year low.
[IDnLDE7840PL]
Belgian bank KBC and insurer Ageas , as
well as French lender Societe Generale and German peer
Commerzbank , were all down more than 2 percent, while
the sector was down 1 percent.
"Euro zone worries are back in play once again amidst signs
that austerity measures may be faltering," Cameron Peacock,
market analyst at IG Markets said in a note.
The resurgence of market fear over the handling of the
crisis comes a day before a German court rules on Berlin's
involvement in the region's bailout fund, and after Chancellor
Angela Merkel was tested by a recent election loss.
Analysts at Royal Bank of Scotland said in a note they
expect the court to rule that a parliamentary vote is needed
before Germany participates in any future bailout via the fund.
"Such a decision is likely to be seen very negatively by
markets, since it will add another layer of domestic politics in
the crisis resolution mechanisms, raising the risk of massive
coordination failure," they said.
Ahead of the ruling, Anita Paluch, trader at ETX Capital,
said many of her German clients were opting not to take on any
more risk and were instead heading to the sidelines.
In further evidence of the political discord at the heart of
core-Europe decision-making, 25 lawmakers in Germany's ruling
coalition refused to back a draft law over boosting the bailout
fund.
The early weakness in banks , mirrored overnight in
Asia, where Europe-exposed banks such as HSBC , one of
several banks facing a U.S. lawsuit over alleged misselling of
securitised sub-prime mortgages, was also sold off.
After falling 10.6 percent in August, the FTSEurofirst 300
is down nearly 6 percent in September, with most of
that coming via Monday's 4.1 percent fall. At 0842 GMT, the
index was down 0.1 percent at 913.40 points.
SWISS BOOST
Countering the early falls, however, were Swiss stocks,
after the central bank said it would act to fight an
overvaluation of the franc, buoying exporters such as Transocean
and ABB .
The SNB said it would act to defend the Swiss franc-euro
exchange rate at 1.20, thereby countering safe-haven flows from
investors looking to escape a weakening economic backdrop and
debt troubles elsewhere in Europe.
The Swiss index rose sharply to be up 3.9 percent by
0843 GMT, propelling Swiss stocks such as Transocean up 9.5
percent and Swatch up 6 percent, to the top of the
European gainers list.
Activity was volatile and conviction was low ahead of the
return of U.S. markets after a holiday on Monday.
The Euro STOXX 50 index of leading blue-chips had
bounced off its August up-channel, Dmytro Bondar, technical
analyst at Royal Bank of Scotland, said, although the signal
would constitute a "bear-flag" if it closes below 2,077 points.
"We have two important pivot points: 2,077 on the downside
and 2,220 on the upside. Currently the price action is testing a
strong support area; and it is important to see which direction
the price breaks, as it will determine the medium-to-long term
market sentiment," he added.
At 0834 GMT, the index was down 0.4 percent at 2,099.09.
U.S. ISM numbers, due out later in the session, will provide
the next insight into the health of the world's largest economy,
and hence the chances for a fresh burst of easy money from the
Federal Reserve, which meets later this month.
(Editing by David Holmes)
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