By Peter Starck
FRANKFURT, Feb 28 (Reuters) - European shares fell on
Thursday led by financials amid mounting U.S. recession worries,
on top of which Federal Reserve Chairman Ben Benanke said some
small U.S. banks exposed to real estate might fail.
Shares in UBS <UBSN.VX>, Europe's biggest subprime casualty,
fell 4.9 percent after Morgan Stanley warned that deteriorating
credit markets could force the Swiss bank to book additional
writedowns and Cheuvreux said weak U.S. data was hitting UBS due
to its exposure to the housing market in the United States.
BNP Paribas <BNPP.PA> dropped 4 percent. A source familiar
with the matter said executives of France's biggest listed bank
sounded out the French government several weeks ago over a
possible bid for scandal-hit rival Societe Generale <SOGN.PA>.
A trader in London cited bid talk of 1.2 BNP shares plus 18
euros in cash for every SocGen share, but BNP said the latest
speculation was "pure rumour". SocGen shares, however, rose 1.9
percent, bucking the broader European trend.
The FTSEurofirst 300 <> index of top European shares
closed 1.8 percent lower at 1,333.42 points, leaving it 11.5
percent down in the year to date compared with a 6.3 percent
loss for the MSCI's main world equity index <.MIWD00000PUS>.
"European equities are vulnerable to a slowdown in the
(United) States spreading to Europe, exacerbated by the euro's
strength, and on a currency-adjusted basis, they don't look
massively attractive," said Andrew Bell, strategist at Rensburg
Sheppards Investment Management.
The U.S. dollar fell to a record low versus the euro <EUR=>.
U.S. fourth-quarter gross domestic product was revised lower and
a surprisingly big jump in U.S. initial weekly jobless claims
added to concern about the world's largest economy and increased
the likelihood of further Federal Reserve rate cuts.
"The renewed strength of the euro underscores the risks for
the macroeconomic outlook and corporate profits," said Gerhard
Schwarz, head of global equity strategy at UniCredit.
WEAK SENTIMENT
Shares in Royal Bank of Scotland <RBS.L> fell almost 2
percent even though Britain's second-biggest bank posted in-line
earnings and raised its dividend.
"This weak sentiment is a symptom of the banking sector as a
whole at the moment -- fuelled by worries about what may still
be to come regarding subprime lending, a continued downbeat
outlook for the U.S. economy and uncertainty for UK housing and
mortgage business," IG Index said in a market comment.
Dresdner Kleinwort said RBS's capital "is very stretched and
the capital market revenue environment is still very tough."
The DJ Stoxx financial services index <.SXFP> fell 2.8
percent and the DJ Stoxx banks index <.SX7P> lost 2.2 percent.
Outside financials, shares in German engineering
conglomerate Siemens <SIEGn.DE> fell almost 4 percent. Traders
attributed the slide to disappointment over the outlook unveiled
by the group's healthcare unit, which makes medical equipment
and generates almost half of its sales in the Americas.
Shares in British pest control and parcel delivery group
Rentokil <RTO.L> tumbled 23.3 percent after a second profit
warning in as many months. "Forecasts are likely to plummet by
over 20 percent on this news, which will also bring into
question the dividend payment," Barclays Wealth said.
Across Europe, Britain's FTSE <> lost 1.8 percent,
Germany's DAX <> fell 1.9 percent and France's CAC <>
dropped 2.1 percent.
Among gainers, brewer InBev <INTB.BR> rose nearly 10 percent
to 58.02 euros, making it the biggest percentage gainer in
Europe after its results beat forecasts and it raised the
dividend.
WestLB upgraded its recommendation to "buy" and raised its
target price on the stock to 65 euros from 60 euros, citing
InBev's "very strong Q4 results ... its robust outlook
statement and the fact that the company has now removed its
dividend payout restriction."
Whitbread <WTB.L> was the top British gainer with a 7.1
percent rise, prompted by a rise in sales and a savings plan
involving merging its hotels and pub restaurants.
"Whitbread's trading remains strong," Panmure Gordon said,
raising its 2010 earnings forecasts for the company 8 percent.
(Additional reporting by Sitaraman Shankar and Amanda Cooper in
London; Editing by Quentin Bryar)
