By Amanda Cooper
LONDON, May 9 (Reuters) - European stocks fell on Friday,
racking up their first weekly loss in a month, after another
round of downbeat financial earnings and a record high oil price
weighed on the broader market.
The FTSEurofirst 300 index <> fell 1.3 percent to
1,342.68 points, having fallen earlier by as much as 1.86
percent. This was the largest one-day fall in a month and
snapped a three-week rally in the index.
Banks were the largest drag on the market, even though much
of the negative news for financials was confined to the
insurance sector.
U.S. insurer AIG <AIG.N> reported a record-breaking $7.8
billion quarterly loss on Thursday and financials were hurt by
the prospect of big asset sales by Citigroup <C.N>.
"We've had a couple of announcements, be it AIG after the
bell yesterday or Allianz today or Swiss Re the day before,
showing the aftermath of the financial crisis is still to show
up in bank accounts, that's raised the question of how much
capital needs to re raised to restore their Tier One capital
ratios," said Heino Ruland, a strategist with FrankfurtFinanz.
Allianz <ALVG.DE>, Europe's largest insurer, said its
Dresdner Bank until had posted a quarterly operating loss of 453
million euros, about the same level as the fourth quarter.
Allianz said it could not give a meaningful forecast for
earnings at the bank because of financial market uncertainty.
This comes at the end of a dismal week for Europe's
insurers. Axa <AXAF.PA> and Aegon <AEGN.AS> both disappointed
investors with their results, while Munich Re <MUVG.DE>, Old
Mutual, Royal & Sun Alliance <RSA.L> warned market conditions
would be tough.
The DJ Stoxx index of European insurers <.SXIP> fell 3.5
percent this week and is down nearly 10 percent this year.
AXA <AXAF.PA> was down 1.9 percent, Swiss Re <RUKN.VX> lost
2.5 percent, and Royal & Sun Alliance fell 3.1 percent. Allianz
shares were down 1 percent, having fallen earlier by as much as
2 percent.
But miner Kazakhmys <KAZ.L> was the worst loser in Europe,
falling 6.7 percent after rejecting a takeover offer from rival
Eurasian Natural Resources Corp <ENRC.L>.
CITI WORRIES
Citigroup, the largest U.S. bank, said it aimed to sell $400
billion of assets -- nearly 20 percent of its total -- over the
next two to three years to become more efficient and profitable.
"Over the past weeks, investors got the feeling that the
credit crisis was easing, but a piece of news like that is sort
of a wake-up call that reminds us that the storm is far from
over," said Marie-Pierre Peillon, head of equity and credit
research at Groupama Asset Management in Paris.
"This Citigroup move might just be the beginning."
The DJ Stoxx index of European banks <.SX7P> fell 1.7
percent, bringing this week's decline to 3.7 percent.
Societe Generale <SOGN.PA>, BNP Paribas <BNPP.PA> and
Barclays <BARC.L> lost between 2 and 2.5 percent.
The FTSEurofirst 300 has risen by about 13 percent since
hitting the low for the year in mid-March. But the index is down
by more than 1 percent this week.
"The rally is running out of steam; it's more to do with the
fact that people are realising the economy in Europe is turning
down," FrankfurtFinanz's Ruland said.
Worries about the health of the financial sector combined
with a fresh record high in oil prices near $125 a barrel <CLc1>
to hit risk appetite, leading to broad pressure on equities.
In a sign the credit crunch is sending waves well beyond the
the financial sector, Spain's Grupo Ferrovial lost 4 percent
<FER.MC> after its British airport operator unit BAA said it may
not be in a position to start debt renegotiations in the coming
weeks as planned because of market conditions.
Ferrovial shares were down by more than 5 percent.
"We are not out of the woods yet," Lena Komileva, head of G7
market economics at Tullett Prebon said in a research note.
"Risk remains a multi-dimensional story and ... the economic
costs are mounting as the crunch moves to the real economy."
Sanofi-Aventis <SASY.PA> dropped nearly 6 percent after
generic drug maker Schweizerhall said it was close to winning
approval for a generic version of the French firm's blockbuster
blood-thinning drug Plavix in Germany. A spokesman for Sanofi
said Plavix was protected in Europe by its patent until 2013.
European car makers were also under pressure after Toyota
Motor Corp <7203.T>, the world's biggest automaker, forecast its
first decline in annual net profit in seven years.
Peugeot <PEUP.PA> was down 1.1 percent, BMW <BMWG.DE> lost
4.2 percent and Daimler <DAIGn.DE> fell nearly 1 percent.
On the scant gainers' list, German utility E.ON <EONG.DE>
briefly rose as much as 3 percent on speculation of a possible
bid from France's EDF <EDF.PA>, traders said, before easing to
show a gain of 1 percent. E.ON declined to comment.
In late trade, sources familiar with the matter said EDF had
submitted an offer for British Energy <BGY.L> and would bid
without a partner.
Around Europe, Germany's DAX index <> and Britain's
FTSE 100 index <> were both down 1 percent, while France's
CAC 40 <> lost 1.9 percent.
(Additional reporting by Toni Vorobyova in London and Blaise
Robinson in Paris; Editing by Quentin Bryar)
