* FTSEurofirst 300 down 2.5 pct after 5.6 pct early drop
* UBS and CS Group rebound on Swiss banking rescue plan
* Energy stocks fall on lower oil price
By Peter Starck
FRANKFURT, Oct 16 (Reuters) - European shares fell on
Thursday, echoing U.S. and Asian equity markets amid mounting
fears of a global economic slowdown which weighed heavily on raw
material stocks such as steelmaker ArcelorMittal <MTP.PA>.
Stocks were above early lows, however, and by 0908 GMT the
FTSEurofirst 300 <> index of top European shares was down
2.5 percent at 881.49 points, having dropped as much as 5.6
percent initially.
The benchmark fell 6.5 percent on Wednesday after its
advances of 10 percent on Monday and 3.1 percent on Tuesday.
Wall Street stocks <> <.SPX> <> had their worst day
since the 1987 crash on Wednesday and Japan's Nikkei <>
posted its biggest one-day fall since that same crash on
Thursday, fuelled by worries of a global recession.
"The situation on the financial markets remains tense,"
German bank Helaba said.
"Attention is increasingly shifting to the real economic
consequences of the financial crisis, which are generating a
fresh wave of uncertainty," Helaba said.
Royal Bank of Scotland said financial sector rescue packages
put together by governments and central banks would serve as a
shock absorber but were unlikely to prevent most euro-area
economies from falling into recession next year.
Morgan Stanley addressed the same theme, saying that while
the decisive fiscal, monetary and regulatory action taken was
likely to prevent a 1930s-style depression, "a recession in the
industrialised world is still in the cards."
"The recession will not be particularly deep but will be
quite prolonged, and will at best be followed by a subpar
recovery," Morgan Stanley said.
ArcelorMittal shares fell 5 percent, and the DJ EuroStoxx
basic resources index <.SXPP> to which it belongs was down 3.8
percent.
"Given the scale of financial distress, we face a period of
massive deleveraging which will seriously hit the global
economy," Landsbanki Kepler said in a note on ArcelorMittal,
forecasting zero growth for Europe and North America in 2009 and
2010.
CHEAPER OIL
Energy stocks lost ground as the crude oil price <CLc1> fell
more than 3 percent to trade near $72 a barrel.
"The timing, speed and extent of any potential global
economic recovery are very difficult to pin down," Credit Suisse
said, cutting its 2009 crude oil price forecast to $75 a barrel
from $110.
Total <TOTF.PA> shares fell 5.8 percent, Royal Dutch Shell
<RDSa.L> lost 4.3 percent and BP <BP.L> was down 3 percent.
Among financials, the focus was on UBS <UBSN.VX> and Credit
Suisse <VSGN.VX> after news that Switzerland's two largest banks
will receive billions of francs of emergency funding from the
Swiss government and others to shore them up against the
financial crisis.
CS Group was up 7.2 percent after falling as much as 10
percent earlier and UBS traded 3.8 percent higher, having lost
nearly 9 percent.
Some traders saw the two stocks' turnaround as a reason for
the broader market's partial rebound while others pointed to a
rise in U.S. stock index futures <DJc1> <SPc1> <NDc1>.
Later in the day the focus will be on quarterly earnings
from heavyweight European and U.S. companies such as Nokia
<NOK1V.HE>, Citigroup <C.N> and Merrill Lynch <MER.N> as well as
Google <GOOG.O> and IBM <IBM.N>.
Corporate reports already in were a mixed bag.
Shares in Aggreko Plc <AGGK.L> rose 8.8 percent after the
British temporary power provider said its 2008 profit would beat
forecasts and be at least 50 percent higher than last year.
British engineering technology company Aveva Group Plc
<AVV.L> said it expected its full-year results to be towards the
top end of forecasts following strong growth in the first half,
sending its shares up 7.3 percent.
Dutch mail company TNT NV <TNT.AS> saw its shares fall 7.6
percent after it said it expects trading conditions to worsen in
its key express delivery unit in Europe in the fourth quarter
due to the financial crisis, hurting its sales.
(Editing by Quentin Bryar)
