* FTSEurofirst 300 closes down 2 percent
* Financials slump despite AIG bailout
* HBOS slides further despite takeover bid from Lloyds
By Brian Gorman
LONDON, Sept 17 (Reuters) - European shares tumbled for a
third straight day on Wednesday as investors dumped financials,
worried that a credit crisis could claim more victims after the
failure of Lehman Brothers <LEH.P> and the bailout of insurer
AIG <AIG.N>.
The FTSEurofirst 300 <> index of top European shares
fell 2 percent to 1,070.10 points, the lowest closing level
since May 2005. The benchmark is down more than 8 percent this
week and on is track for its worst week in more than six years.
The index has lost 29 percent this year.
Banks took the most points off the index, with HSBC
<HSBA.L>, Royal Bank of Scotland <RBS.L> and Banco Santander
<SAN.MC> falling by 4.6-10.4 percent.
British lender HBOS <HBOS.L> slipped 19 percent despite
saying that it was in advanced talks to be bought by rival
Lloyds TSB <LLOY.L>. HBOS has now lost more than 47 percent of
its value in the last three days on worries about funding.
"It's been another volatile day," said Darren Winder, head
of macro and strategy research at Cazenove.
"There's very little confidence in financial companies, and
it's likely to stay that way for a while. Investors can't
identify a strategy that will work."
The credit crisis continued to hit financial institutions,
with Wall Street firms Morgan Stanley <MS.N> and Goldman Sachs
<GS.N> plummeting.
Tuesday's $85 billion rescue of insurer American
International Group <AIG.N> by the U.S. Federal Reserve did
little to calm nerves around the world.
The cost of borrowing overnight dollars spiked above 10
percent, betraying a deep lack of trust in the inter-bank
lending market in Europe. []
Miners suffered because of a broader market sell-off and a
decline in key base metals prices, although gold prices rose as
investors sought a safe haven.
BHP Billiton <BLT.L>, Anglo American <AAL.L>, Vedanta
Resources <VED.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>,
Antofagasta <ANTO.L> and Rio Tinto <RIO.L> fell between 1 and 11
percent.
Across Europe the FTSE 100 <> index fell 2.3 percent,
the German DAX <> slipped 1.8 percent and the French CAC
40 <FCHI> dropped 2.1 percent.
BARCLAYS STANDS OUT
British bank Barclays <BARC.L>, which is buying Lehman's U.S
broker dealer business, rose 3.2 percent to stand out in a sea
of red.
Elsewhere macroeconomic signals were also gloomy.
German Chancellor Angela Merkel said Europe's largest
economy will not escape unscathed even though the impact of the
global market turmoil has been moderate so far.
And the number of Britons claiming unemployment benefit rose
for a seventh consecutive month in August and by its biggest
amount since December 1992.
Energy stocks were mixed as the crude oil price <CLc1> pared
gains, up 1.6 percent at $92.60 a barrel late in the afternoon.
Shares in Repsol <REP.MC> were up 0.6 percent, Royal Dutch Shell
<RDSa.L> rose 0.7 percent and Statoil Hydro <STL.OL> gained 1.2
percent. But BP <BP.L> fell 0.8 percent.
But analysts said the focus continued to be squarely on
financials as uncertainty prevailed after the folding of Lehman
and the travails of AIG.
"There's no transparency, We don't know about funding, the
cost of it and the size of the problem," said Cazenove's Winder.
(Editing by David Cowell)
