By Amanda Cooper
LONDON, Jan 28 (Reuters) - European shares fell on Monday as
fresh worries over the global economy hit commodity stocks and
the fallout at fraud-hit French bank Societe Generale <SOGN.PA>
weighed on financials.
Societe Generale, which last week said it lost $7 billion
due to a fraud by a single trader, fell by as much as 9.6
percent after Citigroup downgraded it to "sell" from "buy" and
halved its price target for the bank.
SocGen shares ended the day down 3.3 percent, which
depressed shares in HSBC <HSBA.L>, Barclays <BARC.L> and Banco
Santander <SAN.MC>.
A drop in the price of crude oil and copper weighed on the
likes of BP <BP.L>, Total <TOTF.PA> and Rio Tinto <RIO.L> as
concern that Japan may be the next economy teetering on the
brink of recession rekindled investor fears of a contraction in
global demand for raw materials.
The FTSEurofirst 300 <> index of top European shares
fell 1 percent to 1,317.15, points, bringing losses for January
to 12.6 percent, well on track for the worst month in more than
five years.
"Basically the story has been the same for quite a while
now, since the beginning of the year, of weak economic figures
and low visibility from companies," said Philippe Gijsels,
senior equity strategist at Fortis Bank in Brussels.
"This means that the scenario we've put forward ... remains
in place, where we turn more negative on the markets, he said,
adding: "It is clear that the U.S. economy will go into at least
a mild recession."
European banks have lost about 14 percent so far this year,
making them one of the worst performers as mounting losses from
the U.S. subprime lending crisis and now the fraud at SocGen
batter the sector.
Citi said the fraud losses and fixed-income risk provisions
had "severely impaired" SocGen's franchise and noted that a
rights issue was set to come at a deep discount, diluting
earnings.
Barclays shed 1 percent, HSBC was down 2 percent and UBS
<UBSN.VX> was down 1.5 percent.
GROWTH FEARS HIT COMMODITIES
Commodity stocks also came under pressure, tracking falls in
crude <CLc1> below $90 a barrel and copper futures <MCU3=LX>.
Index heavyweights BP and Shell <RDSa.L> were down between
1.1 and 1.3 percent, while miners Anglo American <AAL.L>, Rio
Tinto, Lonmin <LMI.L> and Antofagasta <ANTO.L> all fell between
1.1 and 4.8.
Britain's FTSE 100 <> was down 1.4 percent, Germany's
DAX <> was flat and France's CAC <> was down 0.6
percent.
Another batch of weak U.S. housing data initially hurt U.S.
stocks but Wall Street shares eventually pared losses to show a
modest rise, helped by positive earnings surprises from Corning
<GLW.N>, a maker of glass for flat-panel displays, and McDonalds
<MCD.N>.
Later in the week, the U.S. Federal Reserve releases its
decision on monetary policy, following its surprise 75-basis
point cut last week, although the expectation of a half-point
cut at this week's meeting has waned somewhat.
Among the few gainers was Belgian-Dutch financial group
Fortis <FOR.BR>, which rose 7 percent after it gave an update to
investors, who were fearing the worst on its subprime exposure.
It said on Sunday its 2007 profit could take a 1 billion
euro ($1.47 billion) subprime-linked writedown. The stock had
dropped sharply on Friday on market talk of a profit warning.
Bernard McAllinden, a strategist for NCB Stockbrokers in
Dublin, said banks' earnings in the U.S. made the European
financial sector look better.
"The lion's share of the subprime writedowns have been
accounted for by the U.S. banks and a limited number of
investment banks in Europe," he said.
"So far so good: If you know where it is, you know where it
isn't."
(Additional reporting by Sitaraman Shankar in London and Blaise
Robinson in Paris; Editing by Paul Bolding)
