By Peter Starck
FRANKFURT, March 7 (Reuters) - European shares fell on
Friday as new reports of credit market strains weighed on
financials, while economic growth worries hit shares in basic
resource companies such as miners.
Financial shares were the largest sectoral drag on the
broader market, as HSBC <HSBA.L>, ING <ING.AS> and Royal Bank of
Scotland <RBS.L> fell between 1.1 and 3 percent, while French
insurer AXA <AXAF.PA> fell 3 percent.
At 0955 GMT, the FTSEurofirst 300 index <> of top
European shares was down 1.2 percent at 1,267.20 points, having
fallen as much as 1.7 percent earlier, to its lowest intraday
level since Jan. 23.
"The market has come off the rails and is veering this way
and that, like a pennant in the wind," one trader said.
"The conditions point to a continuation of the recent
volatile and downside-prone market phase for European stocks,"
LandesBank Berlin (LBB) said in a note.
A break below the 2007 low of 3,528.88 points on the DJ Euro
Stoxx 50 index <> would be a "strong negative impulse,"
LBB said.
The top-50 index was down 1.2 percent, leaving it 1.3
percent above that low, hit in intraday trading on Jan. 22.
"European equities are both cheap and oversold. However,
with more bad news in the pipe near term we believe the
European indices still have new lows to make," Bear Stearns said
in a strategy note.
Oil <CLc1> traded near $106 a barrel and gold <XAU=> was not
far off a record of $991.90 hit in New York on Thursday on
dollar weakness, which saw the euro advance to new highs above
$1.54 <EUR=> on Friday.
"The U.S. economy is being mismanaged. That is hurting the
dollar and pushing up commodities. That equals inflation and
makes central banks' job very hard. That's bad for the economy
and bad for equities," another trader said.
European credit derivative indexes widened sharply early on
Friday, hitting all-time record wide levels, after sharp
overnight falls in U.S. and Asian stock markets.
DEFAULTS
In the United States on Thursday, shares in Thornburg
Mortgage Inc <TMA.N> sank 51 percent on worries the "jumbo"
mortgage lender might go bankrupt, after its failure to meet a
margin call triggered defaults under other lending agreements.
Carlyle Capital Corporation <CARC.AS>, a Dutch-listed
affiliate of private equity firm Carlyle Group [], said on
Friday it had received substantial additional margin calls and
additional default notices from its lender which could deplete
its liquidity.
Elsewhere in the financial sector, shares in French bank
Societe Generale <SOGN.PA> fell 2.3 percent, British bank
Barclays <BARC.L> was down 2.2 percent.
Worries of slower economic growth hit miners BHP Billiton
<BLT.L>, down 3.8 percent, and Rio Tinto <RIO.L>, which fell 3.0
percent.
Shares in Veolia Environnement <VIE.PA> fell 6.6 percent
after the company posted 2007 profits below expectations and
said the economic environment was challenging.
Shares in Telecom Italia <TLIT.MI> were down 6.2 percent
after the telecoms operator said 2007 net profit fell 19 percent
and almost halved its dividend. DZ Bank said Telecom Italia's
figures were weak and management's guidance disappointing.
Fortis shares <FOR.AS> ranked among the few gainers,
reversing early losses to trade 3.2 percent higher after the
Dutch-Belgian financial services group reported profit halved in
the fourth quarter after a 1.5 billion euro ($2.3 billion)
subprime-related writedown, and said it was in talks on a deal
that would boost its solvency.
"It's a big hit, but at least we know now," said one
Brussels-based trader. "The market was looking only for
negatives and didn't find so much."
U.S. February jobs data, seen by analysts as a key factor
for the U.S. Federal Reserve's next interest rate decision on
March 18, are due at 1330 GMT, with non-farm payrolls expected
by economists to show a rise of 25,000.
"There are rumours that if the reading comes in negative for
a second consecutive month, then this could spark another
emergency Fed rate cut," ABN Amro said in a note, adding that a
75 basis point cut by the Fed on March 18 was almost fully
priced in.
(Editing by Quentin Bryar)
