By Blaise Robinson
PARIS, Feb 11 (Reuters) - European stocks fell on Monday,
adding to last week's sharp losses, because of persistent
concerns over the impact of tighter lending on the economy.
But the retreat was limited by rising energy shares, which
tracked crude prices higher after Venezuela threatened to halt
oil exports to the United States. Royal Dutch Shell <RDSa.L>
gained 1 percent and BP <BP.L> rose 0.8 percent.
At 0936 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.6 percent at 1,295.33 points. The
index lost 3.7 percent last week, hit by fears of a U.S.
recession and worries that financial institutions have not yet
revealed the full impact of the credit crisis on their books.
"Spreads are widening again in credit markets and that means
the market anticipates a very gloomy scenario," said Romain
Boscher, head of equity management at Groupama Asset Management,
in Paris.
European credit spread indexes opened slightly wider,
hovering near record highs touched on Friday on speculation
about the unwinding of loss-making structured credit positions.
The iTraxx Crossover index <ITCRS5EA=GFI>, made up of 50
mostly "junk"-rated credits, was a little wider at 547 basis
points, while the investment-grade iTraxx Europe index
<ITRAC5EA=GFI>, was at 99 basis points. It had traded briefly
above 100 basis points on Friday, according to Deutsche Bank.
Banks, hammered over the past six months by tightening
credit conditions as well as huge writedowns related to a
debacle in the risky U.S. subprime mortgage market, were lower
on Monday, with the DJ Stoxx European banks index down 1.2
percent.
UBS <UBSN.VX> was down 1.7 percent and Barclays <BARC.L>
down 1.8 percent.
SOCGEN DOWN
Societe Generale <SOGN.PA>, the French bank reeling from a
massive rogue trading scandal, dropped 3.3 percent after it
launched a rights issue at a steep discount as it aims to raise
cash to bolster its balance sheet.
The French bank's losses related to the U.S. subprime crisis
totalled 2.6 billion euros, including 600 million in write-downs
that were not previously detailed.
"I think there'll be an initial shock from people that it's
so highly discounted, but in this environment, with this market
volatility, it would be ridiculous to price it at anything other
than at this kind of discount. You wouldn't want to risk this
not happening," one London-based trader said.
"It's probably more important that they're taking another
write-down this morning because that might dent some confidence
and make it more toxic for people to purchase it if there are
other skeletons in the cupboard."
The FTSEurofirst 300 has lost nearly 14 percent so far this
year, dragged lower by sustained U.S. recession worries and
fears that it could hurt the global economy.
"One of the risks for equities is the fading resilience of
emerging markets. We thought they could hold on, but now we fear
that they might also tumble," Groupama's Boscher said.
"Most Asian markets have been closed for a couple of days,
and the worry is that they could catch up on last week's sharp
losses in U.S. and European stocks when they reopen, and that
could spark a new wave of sell-off."
China's markets were closed for the Lunar New Year holidays
and will resume trade on Wednesday. Japan's markets were also
shut for Constitution Day on Monday, and will resume on Tuesday.
Hong Kong shares shed 3.6 percent in their first trading day
after the holiday.
Germany's DAX index <> was down 0.7 percent, the UK's
FTSE 100 index <> down 0.4 percent and France's CAC 40
<> down 0.5 percent.
Shares in IKB <IKBG.DE> sank 22 percent as brokers
downgraded the stock following a Reuters report on Friday that
cited sources as saying the stricken German bank was searching
for up to 2 billion euros ($2.9 billion) to stay afloat.
(Additional reporting by Raissa Kasolowsky in London; Editing
by Paul Bolding)
