Banks, autos push European stocks to six-year lows

                                
 * FTSEurofirst 300 falls 0.9 pct, hits six-year closing low
                                
 * Banks under pressure on talk Citigroup to give stake to US
                                
 * Autos skid; some Volkswagen plants temporarily shut
                                
 
                                
 By Atul Prakash
                                
 LONDON, Feb 23 (Reuters) - European shares hit a six-year
closing low on Monday, as banks fell on reports Citigroup <C.N>
was in talks to give the U.S. government a larger stake, while
auto shares slipped on persistent concerns about falling demand.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
closed 0.9 percent lower at 729.39 points, off a high of 748.46
earlier in the session. The index is down 12 percent this year
after plunging 45 percent in 2008.
Switzerland's largest bank, UBS <UBSN.VX>, fell to a new
all-time low after the lender's top executives met with a
barrage of criticism for the way they handled a U.S. probe into
tax fraud. Its shares closed 9 percent lower.
                                
 Other banks also fell sharply, with KBC Groep <KBC.BR> down
7.4 percent, Deutsche Bank <DBKGn.DE> slipping more than 5
percent, Credit Suisse <CSGN.VX> down 5.2 percent and Dexia
<DEXI.BR> falling 12 percent.
                                
 "It's very difficult to make an investment case for banks
because of the uncertainty over how much capital dilution they
will suffer in order to be kept in business," said Andrew Bell,
head of research at Rensburg Sheppards.
                                
 Investors earlier welcomed reports the U.S. government could
convert an earlier investment in Citigroup into a larger common
stock holding as a sign the United States was ready to forestall
further paralysis of the financial system.
                                
 But long-standing fears resurfaced about just how the
government would stabilise the banking system.
                                
 "Markets are still being held hostage to the outcome of the
raging debate over whether to nationalise banks or not," said
David Evans, market analyst at BetOnMarkets.com.
                                
 "In the UK, U.S. and throughout the global economy, the
nationalisation question is having a drag effect on any
attempted rallies and acting as a catalyst for any plunges."
                                
 But British banks were broadly positive as finance minister
Alistair Darling said the government would inject billions of
pounds into state-owned Northern Rock bank to try to unlock
lending and help the economy emerge from recession.
                                
 Royal Bank of Scotland <RBS.L> jumped 9.8 percent on
expectations it was set to announce a revamp to create a
non-core division into which unwanted assets would be placed.
                                
 
                                
 AUTOMAKERS SKID
                                
 Automakers were among the biggest decliners. BMW <BMWG.DE>,
Daimler AG <DAIGn.DE>, Porsche <PSHG_p.DE>, Volkswagen AG
<VOWG.DE>, Peugeot <PEUP.PA>, Renault <RENA.PA>, Fiat <FIA.MI>
were down 3.8-10 percent.
                                
 Underlining the severity of the crisis battering the car
industry, with sales plunging as the credit crunch hits consumer
confidence, assembly lines at some Volkswagen <VOWG.DE> plants
fell silent as Europe's biggest carmaker switched to a short
working week for the first time in 26 years. [ID:nLN525293]
                                
 The market sentiment was also down after Germany and Sweden
ruled out underwriting rescue plans for carmakers Opel and Saab.
                                
 "It's going to be a bit of a struggle to reclaim the
thresholds hit earlier this month before markets gave the thumbs
down to the U.S. Treasury's plan," said Mike Lenhoff, chief
strategist at Brewin Dolphin.
                                
 "The newsflow has been staggeringly and unremittingly poor
-- GDP figures for the final quarter of last year are incredibly
bad, it's as if international trade has come to a grinding halt,
and companies are cutting back on output, which can only mean
one thing: more job cuts," he said.
                                
 Oils were mixed, with a 1 percent drop in crude putting
pressure on some stocks and capping gains in others. BP <BP.L>,
Royal Dutch Shell <RDSb.L>, Tullow Oil <TLW.L> and Repsol
<REP.MC> fell 0.9-2 percent, but BG <BG.L>, Total <TOTF.PA> and
StatoilHydro <STL.OL> added 0.8-2.3 percent.
                                
 Miners were broadly higher, with Anglo American <AAL.L>,
Xstrata <XTA.L>, Antofagasta <ANTO.L>, Eurasian Natural
Resources <ENRC.L> and Rio Tinto <RIO.L> up 0.3-0.7 percent.
                                
 French investment bank Natixis <CNAT.PA> rose 5.9 percent
after news that Banque Populaire and Groupe Caisse d'Epargne,
which own a 71 percent stake in Natixis, will get an extra 2.5-5
billion euros ($3.1-$6.3 billion) of aid from France.
                                
 Across Europe, Britain's FTSE <.FTSE>, France's CAC <.FCHI>
and Germany's DAX <.GDAXI> were 1-2 percent lower.
 (Additional reporting by Sitaraman Shankar in London and Peter
Starck in Frankfurt, editing by Dan Lalor)