By Sitaraman Shankar
LONDON, March 10 (Reuters) - European shares fell to their
lowest close since mid-2006 on Monday as worries intensified
that a credit crisis would lead to more losses at banks and cast
a lengthening shadow over economies, hurting demand for metals.
The FTSEurofirst 300 <> index of top European shares
ended 1.15 percent lower at 1,254.76 points.
Banks and mining stocks took the most points off the
pan-European index, with UBS <UBSN.VX> falling 4 percent, BNP
Paribas <BNPP.PA> 2.4 percent and Credit Suisse <CSGN.VX> 3.2
percent.
The top three negative weights on the index were mining
stocks Rio Tinto <RIO.L>, BHP Billiton <BLT.L> and Anglo
American <AAL.L>, which fell between 4 and 6 percent, driven by
a fall in copper prices.
"People are concerned at signs that the financial system is
not repairing itself, and that earnings outside the financial
sector are now going to get hurt," said John Haynes, strategist
at Rensburg Sheppard Investment Management.
"Logically hedge funds should be the next victim and people
who deal with hedge funds, the prime brokers, those who supply
capital."
"Interest rate cuts are not enough -- this is beginning to
go beyond the Fed," he said.
The Federal Reserve is widely expected to cut interest rates
by a further 75 basis points next week.
U.S. stocks fell as traders cited talk that a Wall Street
firm faced liquidity concerns, dragging down financial shares
and adding to anxiety about the credit crisis.
Bear Stearns <BSC.N> pared losses but was still down 9
percent in New York after Ace Greenberg, chairman of its
executive committee said rumours of liquidity problems at the
bank were "totally ridiculous".
While metals fell, oil rose to a record at $107.85 a barrel,
lifting stock in BP <BP.L>, Shell <RDSa.L> and British Energy
<BGY.L> by 0.5-1.8 percent but weighing on the overall market.
The euro weakened slightly to $1.5335. Analysts say that a
combination of oil and the weak dollar could hurt equities
already hammered by the credit crisis, by raising input costs
intolerably and making exports uncompetitive.
And the cost of borrowing three month euro funds rose by
more than 5 basis points to 4.55875 percent <EUR3MFSR=>, the
highest in two months as deteriorating conditions in financial
markets prompted banks to shell out more to get hold of cash.
Across Europe, Britain's FTSE <>, France's CAC <>
and Germany's DAX <> fell 1-1.2 percent.
CHINA TALK LIFTS HSBC
HSBC <HSBA.L> was the top positive weight on the
pan-European index, gaining 1.5 percent after reports the global
bank would try to raise its stake in Bank of Communications
<3328.HK>, China's fifth-largest lender, beyond 20 percent when
regulations allow.
The chairman of BoCom told reporters the bank was talking to
regulators about allowing HSBC to raise its stake to as much as
40 percent but if the rules did not change, there was no way
this would be achieved.
Spanish utility Iberdrola SA <IBE.MC> was up 1.2 percent, as
an election victory for the ruling Socialist Party fanned
speculation sector consolidation would go through more smoothly,
dealers said. Gas Natural <GAS.MC> jumped 3.7 percent.
Iberdrola, Spain's top utility by market capitalisation, has
been in play since it emerged that shareholder ACS <ACS.MC> had
held talks with France's EDF <EDF.PA> on a break-up bid that
would also include Union Fenosa <UNF.MC>, controlled by ACS.
The FTSEurofirst 300 has fallen by 16.7 percent so far this
year and is more than 20 percent below last July's 6-1/2 year
peaks as the deterioration in the credit markets has hit the
financial sector particularly hard.
Volkswagen <VOWG.DE> rose 1.7 percent as Focus magazine
reported, without citing sources, that Porsche plans eventually
to raise its Volkswagen stake to 75 percent in order to achieve
a domination and profit transfer arrangement.
Porsche <PSHG_p.DE> said it would not seek to raise the
stake, but its shares fell 2.6 percent.
(Additional reporting by Ana Nicolaci da Costa; editing by
Rory Channing)
(Reporting by Sitaraman Shankar)
