By Sitaraman Shankar
LONDON, Feb 15 (Reuters) - European shares ended sharply
lower on Friday, reflecting growing investor concern over the
U.S. economy and the prospect of more writedowns at top banks as
a result of the credit crisis.
The FTSEurofirst 300 index <> of top European shares
ended 1.96 percent lower at 1,309.34 points, with banks the top
weighted losers as investors switched to select defensive food
and pharma stocks.
French bank Natixis <CNAT.PA> was the top loser on the
FTSEurofirst 300, tumbling 11 percent after it unveiled more
than 1 billion euros ($1.5 billion) of writedowns linked to the
credit crisis.
UBS <UBSN.VX> fell 3.8 percent, taking its losses for the
week to around 12 percent as Citigroup said in a note that it
expected more writedowns at the Swiss bank.
Preliminary February consumer sentiment data in the United
States disappointed, a gauge of manufacturing in New York State
hit its weakest level since April 2003 and electronics retailer
Best Buy <BBY.N> issued a profit warning, shaking U.S. stocks.
And Citigroup <C.N> said it had suspended investor
withdrawals from a $500 million credit hedge fund to give it a
chance to "stabilise".
"The signs are that the U.S. is gradually slipping into
recession, the world economy is slowing, subprime problems are
not going away and the technical picture looks dismal
everywhere," said Philippe Gijsels, strategist at Fortis Bank in
Brussels.
"We would recommend selling into any strength, reducing
exposure to equities to neutral or underweight during any
rally."
Banks fell across the board, with HSBC <HSBA.L>, BNP Paribas
<BNPP.PA>, Societe Generale <SOGN.PA>, Barclays <BARC.L> and
Standard Chartered <STAN.L> falling by 2.3 to 4.1 percent.
Deutsche Postbank <DPBGn.DE> was one of the few financials
to buck the trend, gaining 2.8 percent on persistent takeover
talk.
MINOR GAINS
The FTSEurofirst 300 had a torrid January, recovering only
towards the end of the month as the United States Federal
Reserve stepped in with 125 basis point in two interest rate
cuts.
Since hitting a low for the year early on Jan. 22 ahead of
the Fed's first rate cut, the index has clawed back 7 percent,
but is still 20 percent off its multi-year peak hit in mid-July,
a magnitude of fall that many analysts use to characterise a
bear market.
Financials have led the fall, rattled by a set of writedowns
banks have been forced to make after being caught on the wrong
foot by the credit market blowout.
UBS slumped on Thursday after unveiling tens of billions of
dollars in new exposure to risky U.S. mortgages, leveraged
finance and complex securities, and investors punished the stock
for the second day in a row on Friday.
"We estimate that the $80 billion remaining exposures could
need 12-20 billion Swiss francs more markdowns in 2008,"
Citigroup said in a note on UBS published on Thursday.
"We continue to recommend an underweight stance on the
European investment banks, with fears on revenue outlooks and
balance sheet stretch as well as markdowns," Citi said.
Investors sought safety in defensives, with drugmaker
GlaxoSmithKline <GSK.L> rising 1 percent after billionaire
Warren Buffett's holding company Berkshire Hathaway <BRKa.N>
picked up a small stake. Foods group Cadbury <CBRY.L> gained 1.9
percent.
Elsewhere, German dialysis group Fresenius Medical Care
<FMEG.DE> gained 2.5 percent.
French jet engine maker Safran <SAF.PA> jumped 6.2 percent
to top percentage gainers in Europe and miner Vedanta <VED.L>
gained 3.4 percent to top British gainers, both helped by
brokerage upgrades.
Around Europe, Germany's DAX index <> lost 1.9
percent, UK's FTSE 100 index <> was down 1.6 percent and
France's CAC 40 <> slid 1.8 percent.
(Additional reporting by Raissa Kasolowsky; editing by Rory
Channing)
