* FTSEurofirst 300 sags 0.6 pct, down 9 pct so far this week
* Central banks' cash injections fail to stop the selloff
* HBOS jumps 17 pct after takeover by Lloyds
By Blaise Robinson
PARIS, Sept 18 (Reuters) - European stocks ended lower on
Thursday after a rollercoaster session, as a coordinated move by
the world's leading central banks to ease the credit squeeze
failed to halt the equities selloff that started on Monday.
The FTSEurofirst 300 <> index of top European shares
closed 0.6 percent lower at 1,063.62 points, falling for the
fourth straight session and ending at its lowest closing level
since April 2005.
The index has lost around 9 percent so far this week, and is
on track for its biggest weekly drop since the attacks of Sept
11, 2001. The declines follow Lehman Brothers' <LEH.P> collapse,
the takeover of Merrill Lynch <MER.N> and the bailout of insurer
AIG <AIG.N>.
"There are a lot of pending issues in the financial sector,
and probably a lot of bad surprises in the pipeline," said
Jean-Claude Petit, head of equities at Barclays Wealth Managers
France.
"This crisis constitutes a turning point in the business
model of banks and the way Wall Street works. Consolidation
among banks is inevitable. But these are "arranged marriages"
under the pressure of the U.S. authorities."
The world's top central banks joined forces on Thursday to
throw a multi-billion dollar lifeline to global markets in a
dramatic effort to free up bank-to-bank lending, frozen by the
turmoil on Wall Street.
In an unprecedented move, the U.S. Federal Reserve made an
extra $180 billion available to major central banks to lend on
to their local commercial banks in a bid to get dollars
circulating in overnight and term money markets.
European banking stocks, which had had a tentative recovery
earlier in the session, ended the day mixed.
UK lender HBOS Plc <HBOS.L> jumped 17 percent after Lloyds
TSB <LLOY.L> said it would take over the embattled UK lender in
a $22 billion deal helped through by the government. Lloyds sank
15 percent.
Barclays <BARC.L> was down 5.3 percent, Royal Bank of
Scotland <RBS.L> down 4.5 percent, while BNP Paribas <BNPP.PA>
rose 3 percent and Credit Suisse <CSGN.VX> gained 2.8 percent.
"Recent events should not come as a surprise to those who,
like us, see the U.S. economy sliding into deep recession as a
result of long years of grotesque debt excess," Albert Edwards,
strategist at Societe Generale, wrote in a note.
"Amid recent chaos, few realise that the next phase of
de-leveraging has only just started."
U.S. stocks were also in the red on Thursday, hit by
concerns over the fate of investment bank Morgan Stanley <MS.N>,
whose stock tumbled 22 percent.
Adding to the gloom, U.S. asset manager Putnam Investments
said on Thursday that it had closed its $15 billion Prime Money
Market Fund due to redemption pressures.
Stock exchange operators Deutsche Boerse <DB1Gn.DE> and the
London Stock Exchange <LSE.L> gained 7.5-7.9 percent, with
traders citing increased volume and speculation that investors
could move away from alternative trading platforms such as
Turquoise back to more established ones.
German carmaker Volkswagen <VOWG.DE> soared 27 percent.
Traders mentioned short-covering sparked by expectations that
Porsche <PSHG_p.DE> would raise its VW stake further. Volkswagen
shares have rallied strongly over the past few sessions, after
Porsche announced it had raised its stake in VW to over 35
percent.
"It has hardly anything to do with fundamentals, it is just
a short squeeze, people covering short positions -- and maybe
Porsche or third-party buying," said Robert Heberger, an analyst
at Merck Finck.
Across Europe, the FTSE 100 <> index fell 0.7 percent,
Germany's DAX <> eked out a gain of 0.04 percent and
France's CAC 40 <> lost 1.1 percent.
So far this year, the FTSE 100 is down 24 percent, the DAX
is down 27 percent and the CAC 40 is down 30 percent.
(Reporting by Blaise Robinson; Editing by Erica Billingham)
