* FTSEurofirst 300 down 0.1 pct
* Spanish report says 11 EU banks set to fail stress test
* ABB, Husqvarna rally after positive results
* Heineken dips after posting lower-than-expected sales (Recasts, adds detail, quote)
By Alistair Smout
EDINBURGH, Oct 22 (Reuters) - European shares briefly gave up early gains on Wednesday, after a report that at least 11 banks are set to fail this weekend’s stress tests took the shine off of a raft of positive corporate earnings reports.
Euro zone banks fell over one percent after Spain’s Efe news agency reported that least 11 banks from six European countries are set to fail the region-wide financial health check this weekend, citing several unidentified financial sources.
The STOXX Europe 600 euro zone bank index recovered to trade just 0.2 percent lower, however, with Spain’s economy minister saying he was confident Spanish lenders would do well in the European Central Bank’s checks, and Austria’s Erste Bank denying it was among those that had failed the test.
Erste Bank was down 1.6 percent, having traded as much as 2.3 percent lower following the report.
The ECB sought to cool speculation. “Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October,” said a spokesman.
The issue “does underline the fragility of the European economy because if you don’t have secure, robust banking institutions in place, (the economy) just won’t be able to grow,” David Battersby, investment manager at Redmayne-Bentley, said.
The pan-European FTSEurofirst 300 was up 0.1 percent at 1,300.31 at 1105 GMT, regaining much of the ground lost after the stress-test report came out.
Earnings reports helped to give some support to the market.
Shares in Swiss engineering group ABB rose 1.6 percent, having been up as much as 3.3 percent after posting a bigger-than-expected rise in orders, helped by demand from the oil and gas industries.
Outdoor equipment maker Husqvarna also beat earnings expectations, sending its shares surging 6.9 percent, while aluminium producer Norsk Hydro rose 1.8 percent on Wednesday after posting third-quarter earnings above expectations.
So far in Europe’s earnings season, 9 percent of STOXX 600 companies have reported results, of which 65 percent have met or beaten profit forecasts, according to data from Thomson Reuters StarMine.
However, British American Tobacco fell 4 percent, taking the most points off of the FTSEurofirst 300, after reporting an accelerated decline in the number of cigarettes sold, citing economic pressures on smokers around the world to rein in spending.
Heineken also fell after results down 1.7 percent as the world’s third largest brewer reported lower-than-expected beer sales in the third quarter.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today’s European research round-up
Additional reporting by Atul Prakash in London and Blaise Robinson in Paris; Editing by Ruth Pitchford