European shares turned negative Thursday morning amid growing fears for Europe's banking sector. Earlier, Asian markets posted record losses at the close of trade, with Tokyo shares shedding 5%.
REUTERS - European shares surrendered early gains and turned negative on Thursday morning, losing ground for the seventh session in a row as escalating fears over the beleaguered banking sector hit shares such as HSBC.
Banks were among the biggest losers with Anglo Irish Bank down 16 percent, BNP Paribas down 6 percent and HSBC down 4.2 percent.
Deutsche Postbank fell 20 percent amid downbeat comments by analysts on revised terms of a deal under which Deutsche Bank is buying a stake in Postbank from Deutsche Post.
At 0935MT the FTSEurofirst 300 index of top European shares was down 0.9 percent at 797.23 points.
After a brief tick up in the first few sessions of the year, the index is now down 4.6 percent in 2009, after plummeting 45 percent last year, hit by the global credit crisis that tipped the world economy into a sharp downturn.
The benchmark index is now up just 6.2 percent from its multi-year low reached on Nov. 21.
"A lot of banks still need to recapitalise because asset valuations continue to spiral down. That, coupled with rising provisions for bad loans," said Sebastien Barthelemi, analyst at Louis Capital Markets.
"The problem is investors are getting fed up with all the capital increases, and in some cases like Lloyds and HBOS the capital hikes didn't go well and the government had to come to the rescue," he said.
"The European Central Bank's rate cut will certainly help the banks but it doesn't change the fact that they still need to raise capital."
Investors will closely watch the ECB interest rate decision at 1245 GMT -- with a Reuters poll showing analysts expect the ECB to cut its key interest rate by 0.5 percentage points to 2 percent --, as well as ECB's President Jean-Claude Trichet's news conference.
THE WORST NOT YET BEHIND
Overnight on Wall Street Citigroup faced fresh turmoil as investors questioned whether the bank had the capital strength to cope with a global financial crisis, sending its shares down 23 percent.
Adding to the grim picture, JPMorgan Chase & Co's chief executive Jamie Dimon said there was no relief in sight for the banking sector.
"The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009," he told the Financial Times. "In terms of our sector, we expect consumer loans and credit cards to continue to get worse."
The DJ Stoxx banking index was down 2.1 percent on Thursday. It tumbled 65 percent in 2008, hit by the financial crisis that began with U.S. mortgage defaults in 2007 and has now plunged major economies into recession, reshaped the banking landscape and taken entire countries to the brink of bankruptcy.
Around Europe, UK's FTSE 100 index was down 0.9 percent, Germany's DAX index down 1.1 percent, and France's CAC 40 down 1.1 percent.
Shares in oil producers also slipped, as oil dropped to $36.82 a barrel. BP shed 0.8 percent and Royal Dutch Shell fell 0.4 percent.
Continental fell 19 percent on news that the automotive parts and tyre maker was considering a 1 billion euro ($1.31 billion) capital increase.
Among the very few stocks on the upside, mid-cap HMV Group rose 5 percent after the music and books retailer late on Wednesday reported a 0.5 percent rise in underlying sales for the five weeks to Jan. 3 and agreed to buy 14 stores from the administrators of stricken rival Zavvi.
Date created : 2009-01-15