European shares fell on Friday, hitting a two-week low ahead of the
weekend G20 meeting, with BP hitting 14-year lows as it struggled to
clean up the Gulf of Mexico oil spill.

Oil shares featured
among the worst performers. BP, down 6.5 percent, continued its battle
to contain the oil spill as bad weather loomed. Five-year BP credit
default swaps, an insurance-like instrument against debt default,
widened 19 basis points to 555 basis points, CDS monitor Markit said.

Its
peers BG Group, Royal Dutch Shell and Total fell 1 percent to 1.9
percent.

By 0922 GMT, the pan-European FTSEurofirst 300 index
of top shares was down 0.5 percent at 1,015.54 points, but trading was
choppy, with the index being up as much as 1,025.19 earlier in the
session.

“A nervous morning ahead of the G20, no one is really
wanting to take any big positions ahead of the G20,” said Justin
Urquhart Stewart, director at Seven Investment Management. “There is
little reason for the market to drive higher today.

“Investors
are worried about the increasing split between Europe and the U.S. over
when governments should cut budget deficits.”

Before the G20
summit in Toronto, officials tried to downplay differences between the
United States and Europe over how quickly to shift from crisis-fighting
mode to budgetary belt-tightening.

Technical charts indicated
there could be further losses ahead for European stocks.

Analysts
said the STOXX Europe 50 has held below its 200-day moving average and
if it breaks below its support trend line of 2,394, the index could go
back to revisit the May low of 2,255.

The index was down 0.5
percent at 2,402.85 at 0922 GMT.

Banks rise
Banks featured among the top risers, after
sharp falls in the previous session on news U.S. lawmakers were close to
finalise a historic overhaul of financial regulations as they reached a
preliminary deal on derivatives, the most contentious sticking point of
the bill.    HSBC, Banco Santander and Societe Generale rose 1.1 to 1.8
percent.

German carmakers Daimler and Volkswagen fell 2.6
percent and 2.3 percent respectively, after UBS downgraded the stocks to
“neutral” from “buy”.

Later in the session, investors will eye
the final estimate of U.S. GDP growth figures for the first quarter,
due at 1230 GMT. Investors will also look at the final reading of the
June University of Michigan consumer sentiment index, due at 1355 GMT.

Across
Europe, the FTSE 100 index was down 0.5 percent, Germany’s DAX fell 0.7
percent and France’s CAC 40 lost 0.6 percent.

The Thomson
Reuters Peripheral Eurozone Countries Index slipped 1.1 percent.
(Reporting
by Joanne Frearson; Editing by Hans Peters)