By Sruthi Shankar
April 30 (Reuters) - European shares fell from seven-week highs on Thursday after the European Central Bank held back on big policy moves despite mounting evidence of the damage being wrought on the euro zone economy by the coronavirus crisis.
Euro zone banks .SX7P sank 5.1% as the central bank said it would pay more for banks to borrow from it but otherwise kept much of its remaining policy powder dry.
The sector also came under pressure from a 8.3% decline in France's Societe Generale SOGN.PA as it reported a quarterly loss after hiking provisions for bad loans and suffered a revenue wipeout at its equity trading division.
"Some market participants had expected other things such as an expansion of quantitative easing. That didn't happen and explains why markets did not react positively after the announcement," said Rabobank's head of macro strategy Elwin de Groot.
"But it does show that the ECB felt it was absolutely necessary to make it clear that liquidity is there for all financing institutions."
The central bank reaffirmed its already vast bond purchase scheme, disappointing some investors who were expecting it to raise its target and add junk-rated bonds to its shopping list in the coming months.
Also weighing on the banking sector, the UK's Lloyds Banking Group LLOY.L became the latest to be hit by provisions against expected bad loans due to the pandemic, while Danske Bank DANSKE.CO swung to a first-quarter net loss, sending its shares down 3.6%.
European stocks were already under pressure, with oil major Royal Dutch Shell RDSa.L slumping 10.2% after it cut its dividend for the first time in 80 years and suspended the next tranche of its share buyback programme amid a collapse in global oil demand.
The wider oil & gas sector .SXEP fell 3.3%
The pan-European STOXX 600 .STOXX fell 1.2%, while euro zone stocks .STOXXE were down 1.3%.
A preliminary reading showed economic activity in the bloc contracted at a record rate in the first quarter and inflation slowed sharply due to coronavirus-induced lockdowns. Economists expect even worse numbers for the second quarter.
However, the STOXX 600 is on course to log its biggest monthly gain since October 2015 as signs of easing restrictions in several major economies, aggressive stimulus actions and more recently, hopes of a coronavirus treatment, helped a recovery from a rout in February
UK's Reckitt Benckiser RB.L rose 4.5% as the consumer giant achieved record sales growth in the first quarter and predicted a stronger than expected performance in 2020 as customers stocked up essentials.
Shares in Nokia Oyj NOKIA.HE gained 4.4% after it eked out a small profit in the first quarter, backed by demand for its new high-margin 5G telecoms equipment, and predicted a strong second half of the year.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Kirsten Donovan)
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