By Peter Starck
FRANKFURT, Jan 21 (Reuters) - European shares fell nearly 6
percent on Monday, their biggest one-day slide since the Sept.
11, 2001 attacks, as fears of a U.S. recession and more write
downs in the financial sector sparked a broad-based selloff.
"This is like a panic. It's like out, out, out (of stocks).
Run for cover," said Dirk Mueller, a trader at Frankfurt
brokerage ICF.
"There is a very ugly sense of capitulation and the worst
thing is that we can't see where it will all end," said Javier
Galan, fund manager at Spanish brokerage Renta 4.
The FTSEurofirst index <> index of top European shares
closed down 5.8 percent at 1,279.85 points, having earlier hit
an 18-month low of 1,278.79. Monday's fall was the index's 11th
drop in 14 sessions for a total loss of 15 percent in 2008.
"Financial markets have again been caught by fears of a U.S.
recession and a worsening of the problems in the financial
sector," Danske Bank strategists said in a research note.
"The pace of the decline has been very strong and indicates
that investors that have been long equities are now taking their
losses," Danske Bank said.
Germany's DAX <> dropped 7.2 percent, the French CAC
40 <> was down 6.8 percent and Britain's FTSE <> lost
5.5 percent. The slide in these three indexes wiped out more
than $350 billion of the value of their constituent stocks,
equal to the combined gross domestic product of Hungary and
Greece.
There were big losses elsewhere, too, with Switzerland's
benchmark index <> falling 5.3 percent, Italy's MIB 30
<> dropping 5.1 percent and Spain's IBEX <> plunging
7.5 percent.
The broad-based selloff in Europe tracked losses for global
equities. The MSCI's main index of world stocks <.MIWD00000PUS>
was down 3.3 percent to its lowest level in over a year. U.S.
stock markets were closed for the Martin Luther King holiday.
SNOWBALL EFFECT
"It's a snowball effect ... there are very, very many
pessimists in the market," said Boris Boehm, fund manager at
Nordinvest in Germany.
"We are not compelled to buy yet despite bearish sentiment,"
investment bank Morgan Stanley's European equity strategy team
said in a note. "We continue to prefer cash over equities."
The spectre of a slowdown in economic growth hit basic
resources shares the hardest, with the DJ Stoxx sector index
<.SXPP> falling 8.1 percent. Steel maker Arcelor-Mittal <MTP.PA>
slumped 11.3 percent and miner BHP Billiton <BLT.L> shed 10.4
percent.
Financials also fell sharply with insurers tumbling amid
worries over their bond exposure after news that a unit of U.S.
Ambac Financial Group <ABK.N> had lost its AAA credit rating."
Dutch ING Group <ING.AS> sank 10.5 percent while and
Germany's Allianz <ALVG.DE>, French AXA <AXAF.PA> and Swiss Re
<RUKN.VX> lost 10 percent each.
Banks also took a beating, with the DJ Stoxx sector index
<.SX7P> down 6.8 percent. In France, BNP Paribas <BNPP.PA> fell
9.6 percent and Spain's Santander <SAN.MC> was down 9 percent.
Societe Generale <SOGN.PA>, which lost 8 percent on Friday
on market rumours that the French bank could report write-downs,
lost a further 8 percent.
"We're falling back into the crisis of confidence in the
financial sector. The banks have been reassuring the market over
their exposure to U.S. mortgage-related investments, but now we
realise there is nothing reassuring about it," said Hugues
Rialan, managing director in charge of discretionary asset
management at Robeco France.
Among the few gaining stocks, Friends Provident <FP.L> rose
3.6 percent after U.S. private equity firm JC Flowers said it
was considering an offer for the life insurer.
(Additional reporting by Sitaraman Shankar and Michael Taylor
in London, Blaise Robinson in Paris, Elisabeth O'Leary in Madrid
and Eva Kuehnen in Frankfurt; Editing by David Holmes)
