By Jeremy Gaunt, European Investment Correspondent
LONDON, July 21 (Reuters) - A raft of concerns about the
state of the global economy, corporate earnings and the banking
system sent European shares lower on Monday, shrugging off large
gains in Asia.
The dollar was slightly weaker against a basket of major
currencies <.DXY>. Oil <CLc1> was up more than a $1.50 a barrel
at around $130 a barrel, but still off recent highs of around
$147.
European shares kicked off the week on a softer note,
reversing last week's upward trend as worries swirled about
corporate health.
"There is, hanging over the market, the idea that the real
cyclical companies haven't yet had major profit warnings whereas
we know that the economy is slowing down," said Arthur van
Slooten, strategist at Societe Generale, in Paris.
The FTSEurofirst 300 <> index of top European shares
was down 0.7 percent.
British lender HBOS <HBOS.L> dropped 4 percent after it said
shareholders subscribed for just 8.3 percent of shares in its 4
billion pound ($8 billion) rights issue, leaving its
underwriters to try to sell almost 3.8 billion pounds of stock.
The tone in Europe contrasted sharply with that of Asia,
where MSCI's index of shares outside Japan <.MIAPJ0000PUS> was
up 3.3 percent on the day. Japan's bourse was closed for a
public holiday.
Investor focus was very much on the U.S. earnings season.
Higher-than-expected results from JPMorgan <JPM.N>, Citigroup
<C.N> and IBM <IBM.N> have been offset somewhat by
lower-than-forecast results from technology sector bellwethers
such as Google Inc <GOOG.O> and Microsoft Corp <MSFT.O>.
OIL FIRMS, DOLLAR DRIFTS
Oil was up $1.52 a barrel at $130.49 following the biggest
one-week slide on record as inconclusive talks between Iran and
world powers over Tehran's disputed nuclear programme dimmed
prospects of ending the row.
Prices were also lifted by worries about Tropical Storm
Dolly, the first storm of the 2008 Atlantic hurricane season
that could disrupt oil production in the Gulf of Mexico.
The dollar steadied nearly two cents away from record lows
versus the euro with sentiment hinged on the strength of U.S.
bank earnings and the reception of a rescue plan for Fannie Mae
and Freddie Mac.
Treasury Secretary Henry Paulson said on Sunday he was
optimistic Congress would approve the government's request for
authority to shore up the two troubled mortgage giants.
"The question is will there be some disappointment in
respect to the rescue package or not. If not, that should be
dollar supportive," said Michael Klawitter, currency strategist
at Dresdner Kleinwort in Frankfurt.
The euro edged up 0.1 percent to $1.5865 <EUR=>.
Euro zone government bond prices were flat to higher,
pausing after a sharp sell-off last week.
Two-year bond yields <EU2YT=RR> were flat at 4.540 percent
while 10-year yields <EU10YT=RR> were 2.2 basis points lower at
4.564 percent.
"There's more second quarter earnings out today and we're
likely going to be watching equities again," said one trader.
(Additional reporting by Blaise Robinson)
