European shares hit by Bayer, Lufthansa; FTSE shines

By Susan Mathew and Medha Singh

(Reuters) - European shares slipped on Tuesday as grim forecasts from German giants Bayer and Lufthansa soured sentiment, while a battered pound helped London's blue-chip index outperform for a second day.

Bayer slipped 3% as it became the latest agricultural supplies company to be affected by flooded farms in the United States and by trade disputes, saying its full-year earnings target has become harder to reach.

Airline Lufthansa dropped 5.6% after posting a decline in second-quarter earnings and saying that the European market was likely to remain challenging this year.

That helped make Europe's travel and leisure index <.SXTP> the biggest faller among major sectors, with a 1.1% drop that would be its worst in more than a month.

With concerns about global growth still bubbling among investors, a GfK survey showed German consumer morale worsening for the third month in a row heading into August as trade disputes bit in Europe's biggest exporter.

Germany's main stocks index <.GDAXI> fell 0.5% by 0758 GMT, while the broader pan-European stocks STOXX 600 <.STOXX> lost 0.4%.

"Most markets are down this morning," said Simona Gambarini, a markets economist at Capital Economics. "The S&P closed lower yesterday. We have a few data releases regarding the eurozone that could push equity prices down but I think everyone is waiting for the Fed meeting."

As evidence continues to build of the impact of a bruising trade war on global growth, expectations that major central banks will adopt accommodative policies have buoyed global markets since a sharp fall in May.

The U.S. Federal Reserve is widely expected to deliver a quarter-point cut in rates on Wednesday, although there is some lingering hope it could respond to President Donald Trump's call for a bigger move - or at least point the way to more easing in the near future.

London's blue chip FTSE 100 <.FTSE> index was the big outperformer of the main indexes, touching fresh 11 month highs on the back of a 3% jump in shares for energy giant BP (NYSE: BP).

The index, heavy with internationally-focused firms who get their revenue from abroad, was also supported by a drop in sterling to more than two-year lows on the rising possibility of a disorderly Brexit. [GBP/] [.L]

Ireland's main stock index ISEQ <.ISEQ>, which tends to fall when fears of a no-deal UK departure from the European Union grow, slid 1%

London-listed BBA Aviation (NYSE: BBA) topped the STOXX 600 with a 5.5% jump after it announced a $1.37 billion deal to sell its aircraft parts unit to private equity firm CVC Capital Partners.

British household goods maker Reckitt Benckiser (NYSE: RB) was the biggest weight on Europe's main index after it reported lower than expected second-quarter sales and cut its full-year revenue target.

French stocks <.FCHI> dipped 0.2%, hit also by data showing the economy slowed slightly in the second quarter

Lenders were also among the biggest decliners in Europe <.SX7P> with bank-heavy indexes in Italy <.FTMIB> and Spain <.IBEX> both declining more than 0.6%.

(Reporting by Susan Mathew and Medha Singh in Bengaluru; editing by Patrick Graham)

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