* FTSEurofirst 300 falls 3.2 pct
* Banks hit by HSBC rights issue, insurers by AIG bailout
* Rio Tinto falls on Australian statement
* FTSEurofirst 2.3 pct off lifetime lows
By Sitaraman Shankar
LONDON, March 2 (Reuters) - European shares slid early on
Monday, led lower by HSBC <HSBA.L>, which tumbled after
unveiling a big rights issue, and insurance stocks, which fell
after U.S. peer AIG <AIG.N> was forced to seek another bailout.
At 0905 GMT, the FTSEurofirst 300 index of top European
shares was down 3.2 percent at 696.79 points, trading at
six-year lows. The benchmark is down 16 percent so far this year
and just 2.3 percent away from a lifetime low hit in March 2003.
HSBC <HSBA.L> fell 10 percent after announcing a 5 for 12
rights issue at 254 pence per share -- a 48 percent discount to
Friday's close -- to raise around 12.5 billion pounds ($17.82
billion). Annual profit more than halved and bad debts mounted
in the United States.
Governments continued to come to the aid of financial
institutions brought to their knees by a credit market crisis,
with the U.S. government throwing a new $30 billion lifeline to
American International Group as the embattled insurer prepared
to report the biggest quarterly loss in corporate history.
AIG shares in Frankfurt <AIG.F> were up 7.5 percent but
insurance stocks in Europe fell, led by ING <ING.AS>, Aegon
<AEGN.AS> and Legal & General <LGEN.L>, which slumped 9 percent.
Allianz <ALVG.DE> fell 5.3 percent and AXA <AXAF.PA> lost 4
percent.
"The S&P broke down last Friday, and nervous European
markets are likely to extend lows with pervasively bad economic
data, worries over bank nationalisation and AIG having to be
bailed out," said Bernard McAlinden, strategist at NCB
Stockbrokers in Dublin.
UK banks followed HSBC lower, with Royal Bank of Scotland
<RBS.L> down 14 percent and Standard Chartered <STAN.L> down 9.5
percent.
Across Europe, Britain's FTSE 100 <> fell 3.3 percent,
while Germany's DAX <> and France's CAC <> lost 3
percent.
RIO FALLS ON AUSTRALIAN STATEMENT
Mining stocks were sharply lower as copper futures fell 1.8
percent.
Rio Tinto <RIO.L> slid 7 percent, tracking losses in its
Australian-listed shares after the Australian government said it
would take its time before deciding on China's planned $19.5
billion investment in Rio.
Rival Anglo American <AAL.L> lost 5.5 percent.
Among gainers, Dutch retailer Ahold <AHLN.AS> ticked up 1.3
percent after it reported a rise in fourth-quarter operating
profit that was well ahead of the average of analyst forecasts.
Analysts said that investors were not going to be too fussy
in seeking signs of an upturn.
"You need to see signs that policy moves are causing
economies to stabilise ... markets would be very sensitive to
any signs with interest rates at zero levels in the United
States and Japan, and this week in the UK," said NCB's
McAlinden, adding that value in European market was "strikingly
good".
Later in the week, investor focus moves to interest rate
decisions from the European Central Bank and the Bank of
England.
Both the ECB and the BoE are expected to cut rates by 50
basis points, the ECB to 1.5 percent and the BoE to 0.5 percent.
Data continued to be bleak. Euro zone manufacturers had
their worst month in at least 12 years in February as a
recession showed no signs of easing, according to Markit's euro
zone manufacturing purchasing managers' index.
(Reporting by Sitaraman Shankar; Editing by Rupert
Winchester)
