European shares weaken as EDF and bank stocks fall

* EDF (Paris: FR0010242511 - news) down after CFO quits

* JP Morgan cuts equities to underweight

* Old Mutual (Other OTC: ODMTY - news) boosted by break-up talk

By Danilo Masoni

MILAN, March 7 (Reuters) - European shares fell on Monday, led lower by a slump in utility EDF after a senior executive quit, and by weaker bank stocks which were impacted by some broker price target cuts.

European stocks have rallied recently after a rocky start to 2016, as oil prices recovered and fears over a U.S (Other OTC: UBGXF - news) . economic slowdown abated. Nevertheless, the pan-European FTSEurofirst 300 index remains down around 7 percent so far in 2016.

JP Morgan Cazenove reduced its rating on equities to "underweight" for the first time since 2007, saying the recent market rebound was set to peter out.

The FTSEurofirst, which had risen to one-month highs on Friday after three straight weeks of gains, was down 1 percent going into the close of the trading session.

EDF fell 7.2 percent, after Finance Director Thomas Piquemal resigned. The French group did not say why he quit but a source familiar with the matter said it concerned EDF's plan to build two nuclear reactors in Hinkley Point, in Britain.

The 18 billion pound ($25.5 billion) project in southwest England was first announced in October 2013 but a final investment decision has been repeatedly delayed.

"This decision is clearly negative for the group, as it underscores the significant difference in opinions within the group concerning this project which, if realised as it is, will put the group's financial situation under pressure," said Xavier Caroen, analyst at Bryan Garnier.

Old Mutual rose 6.5 percent as the company said it was considering strategic options following a Sky News report on Saturday that the financial services company was plotting a 9 billion pounds break-up.

However, banking shares lost ground, with Goldman Sachs (NYSE: GS-PB - news) cutting its price targets on Credit Agricole (Swiss: ACA.SW - news) and Societe Generale (Swiss: 519928.SW - news) , while JP Morgan cut its price target on Barclays (LSE: BARC.L - news) .

European banks may also be adversely impacted if the European Central Bank pushes its deposit rate deeper into negative territory on Thursday in a bid to boost economic activity in the euro zone.

While such a move could encourage banks to lend out more, it could also hit their profit margins.

"Bank lending rates continue to come down, especially in the periphery, suggesting that banks are not able to recoup margins through raising lending rates," said Elga Bartsch, global co-head of economics at Morgan Stanley (Xetra: 885836 - news) . ($1 = 0.7062 pounds)

Today's European research round-up (Editing by Toby Chopra)