By Blaise Robinson
PARIS, April 22 (Reuters) - European stocks slipped in early
trade on Tuesday, adding to the previous session's drop as a
massive rights issue from Royal Bank of Scotland <RBS.L> weighed
on the banking sector.
But the drop was limited by rallying energy and mining
shares, gaining ground as commodity prices remained near
historical highs. Rio Tinto <RIO.L> gained 2 percent and BP
<BP.L> rose 1 percent.
At 0834 GMT, the FTSEurofirst 300 <> index of top
European shares was down 0.3 percent at 1,307.49 points.
RBS announced a record 12 billion pound ($24 billion) rights
issue to cover a potential 5.9 billion pound writedown on the
value of shaky assets and help rebuild a stretched balance
sheet.
RBS will offer 11 new shares for every 18 existing shares at
200 pence per share in the rights issue, Europe's biggest ever,
representing a 46 percent discount to Monday's closing price.
Its shares were down 5 percent at 353.75 pence. The
theoretical ex-rights price for the shares is 307p, according to
Reuters calculations.
"Overshadowing what was going to be a busy day of earnings
in the U.S. and Europe is the RBS rights issue. Coming in at 12
billion pounds, accompanied by a dividend cut and an interim
dividend in shares, this is definitely at the top end of
consensus, but is not really a surprise," said Stephen Surpless,
senior analyst at Cantor Fitzgerald in London.
"As this could be the first in a string of capital raising
moves by European banks, attention could turn to the next likely
candidate."
The DJ Stoxx European bank index <.SX7P> was down 1.2
percent, with the UK lenders among the most hit. Barclays
<BARC.L> was down 4.4 percent and HBOS <HBOS.L> down 5.5
percent.
The RBS rights issue shifted focus from potential writedowns
linked to the U.S. housing slump to the need for European banks
to raise funds.
Another lender ran into problems linked to the financial
market crisis on Tuesday, with Germany's BdB banking association
taking control of German property lender Duesseldorfer
Hypothekenbank <DUOGg.F>
BdB said late on Monday that it plans to sell it after the
lender ran into problems linked to the financial market crisis.
Duesseldorfer Hypothekenbank said it was not facing problems
that could threaten its existence.
French car maker Renault <RENA.PA> fell 2.1 percent after
posting first-quarter sales that missed analysts' forecasts.
Air France-KLM <AIRF.PA> was up 1.7 percent after it
formally withdrew its bid for Alitalia <AZPIa.MI>, sharply
reducing the chances that Europe's biggest airline can be
persuaded to buy the Italian flag carrier.
Alitalia stock was suspended.
On the macroeconomic front, investors will focus on monthly
U.S. home sales, due at 1400 GMT, for insight on the outlook for
the troubled housing sector.
"We saw a surprising rise in U.S. existing home sales last
month but we suspect that this is a spike within a downtrend,
not the sign of a recovery," Bear Stearns analysts wrote in a
note.
Investors will keep an eye on a flurry of updates from U.S.
companies such as AT&T <T.N>, Lockheed Martin <LMT.N>, McDonald's
<MCD.N> and Yahoo! <YHOO.O>.
Germany's DAX index <> was down 0.4 percent, UK's FTSE
100 index <> down 0.2 percent and France's CAC 40 <>
down 0.07 percent.
(Editing by Paul Bolding)
