* Pan-European STOXX 600 falls 0.4 pct
* EasyJet slumps after guidance
* Citi says time to buy European banks
* Osram soars on takeover talk
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By Kit Rees
LONDON, Oct 6 European shares fell on Thursday
after easyJet dropped to its lowest in more than three
years, although the beaten-down banking sector rose for
the third straight session.
The STOXX 600 index fell 0.4 percent after opening
in positive territory, extending the previous session's losses,
when both shares and bonds were hit by worries that the European
Central Bank might wind down the pace of bond-buying before the
end of its asset-purchase programme.
Budget airline easyJet fell almost 7 percent after saying
that its annual profit would fall by more than 25 percent this
year, its first drop since 2009. It cited disruptions, security
concerns and an adverse exchange rate.
Shares in rivals IAG and Ryanair fell 3.9
and 1.5 percent.
"Despite easyJet's strong margins ... and attractive
strategic positioning, we see negative EPS momentum as the
dominant driver for the shares in the short term," analysts at
Liberum, who have a "sell" recommendation on the stock, said in
"Given the seasonality of easyJet and the airline industry,
we see it as unlikely there will be a positive catalyst much
before summer next year."
European banking stocks, however, extended their
gains from the previous session, helped by an upbeat not from
Citi, which upgraded the sector to "overweight" citing signs of
improvement in the credit cycle and loan growth as well as cheap
Unicredit rose 2.3 percent after reports that
France's Amundi had made a higher-than-expected 4
billion-euro offer for its asset manager Pioneer.
Deutsche Bank rose as much as 2.7 percent after
German officials said that the government was pursuing discreet
talks with U.S. authorities to help the lender secure a swift
settlement over the sale of toxic mortgage bonds, according to
sources in Berlin. The stock later pared gains to
end down 0.3 percent but it remains 25 percent above all time
lows hit last week.
Both Deutsche Bank and Unicredit have roughly halved in
value this year.
"You can maybe see a little bit of repositioning, people
buying into some of these banks that are offering a fair bit of
a discount in anticipation of ... when the ECB starts turning
the tap off," Dafydd Davies, partner at Charles Hanover
Osram jumped 10.4 percent to a record high on
reports of a takeover offer from Chinese chipmaker Sanan
Optoelectronics Co Ltd.
German chipmaker Dialog Semiconductor also rallied
7.3 percent after reporting a solid set of preliminary
(Additional reporting by Danilo Masoni in Milan, editing by