European shares down by midday, financial woes weigh

* FTSEurofirst 300 index .FTEU3 down 0.9 percent

* Financials fall as credit crisis concerns resurface

* Miners gain on rising commodity prices

By Eva Kuehnen

FRANKFURT, Aug 21 (Reuters) - European shares fell by midday on Thursday, briefly touching a three-week low as renewed concernsabout banks' balance sheets weighed on financial stocks, off-setting gains in miners. Among individual gainers, Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz) shares rose almost 2 percent after the German car maker denied a magazine report that said it was considering a bourse listing for parts of its market-leading trucks business.

By 1021 GMT, the pan-European FTSEurofirst 300 index .FTEU3 was down 0.9 percent at 1,154.68 points, briefly hitting its lowest level since July 29.

Financial shares were the strongest negative pull on the index and the DJ Stoxx banking index fell 1.9 percent.

HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) fell 2.4 percent, BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) fell 2.5 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) declined 2.9 percent.

Traders said that a report in the Financial Times on Lehman Brothers LEH.N triggered further bad sentiment.

The FT said the beleaguered U.S. investment bank had held talks on a sale of up to half its shares with China's CITIC Securities as well as with state-owned Korea Development Bank (KDB), but both investors walked away saying the price was too high.

CITIC Securities (600030.SS: Quote, Profile, Research, Stock Buzz), China's biggest brokerage, said it had held no formal talks about buying a stake in Lehman.

Worries about the viability of U.S. mortgage finance giants Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) persisted and added to nervousness in the market.

Expectations that an imminent government bailout of the two would wipe out shareholders drove their stocks to almost two-decade lows on Wall Street.

"These are the two main reason for why financials are trading lower at the moment," said Klaus Stabl, head of research at ICF brokerage, referring to news on Lehman and Fannie Mae and Freddie Mac.

He added that the market would quickly forget about such issues once they were solved. "But until then, it's the fear that weighs," he said.  Continued...