* FTSEurofirst falls 5.2 pct, 1 point away from lifetime low
* Banks tumble after AIG losses, HSBC rights issue
* Miners, oils slip as commodity prices retreat
By Atul Prakash
LONDON, March 2 (Reuters) - European equities ended sharply
lower on Monday as banking stocks tumbled after American
International Group (AIG) <AIG.N> posted record losses and HSBC
<HSBA.L> announced Britain's largest ever rights issue.
The FTSEurofirst 300 <> index of top European shares
finished 5.2 percent lower at 682.31 points -- the lowest close
in six years and a whisker away from its lifetime low of 681.17
points hit in March 2003.
The index has fallen 14 percent so far this year after
plunging 45 percent in 2008 on the back of a financial crisis
that began with U.S. mortgage defaults in 2007 and has cast
much of the world into a deep and vicious recession.
Energy stocks also came under severe pressure after crude
prices <CLc1> tumbled more than 9 percent as investors dumped
risky assets and deteriorating world economy threatened to cut
further into fuel consumption.
HSBC <HSBA.L> plummeted 18.8 percent after it launched a
12.5 billion pound rights issue as annual profits more than
halved. Standard Chartered <STAN.L> fell 11.6 percent, Lloyds
<LLOY.L> was down 15.3 percent and <BNPP.PA> slipped 9.3
percent.
"Market conditions are extremely difficult. Quite a lot of
investors have gone into the survival mode, just like the
companies. Capital preservation is the key at the moment," said
Philippe Gijsels, senior equity strategist at Fortis Bank.
Sentiment worsened further after AIG, the recipient of $150
billion in taxpayer aid last year, posted the largest quarterly
loss in U.S. corporate history and took a $30 billion lifeline
from the U.S. government.
Renewed concerns about the health of the financial sector
fanned safety-seeking flows into government bonds across the
board and lifted the dollar to a three-year high.
Among the energy stocks, BP <BP.L>, Royal Dutch Shell
<RDSb.L>, BG Group <BG.L>, Tullow Oil <TLW.L>, Repsol <REP.MC>,
Total <TOTF.PA> and StatoilHydro <STL.OL> shed between 3.6
percent and 5.8 percent.
"Put simply, it's another bloodbath with equity markets
across the globe in a state of panic," said Jimmy Yates, head of
equities at CMC Markets.
NO SIGNS RECESSION EASING
Deteriorating economic indicators forced investors to stay
defensive. Euro zone manufacturing suffered its worst month in
over a decade in February as firms slashed jobs and a recession
showed no signs of easing, a survey from Markit showed.
[]
"Everyone had lingering hopes that by the time we were
moving towards the end of the first quarter there would be signs
the banking industry and world economy would be stabilizing and
the pace of declines would be lessening," said Jim Wood-Smith,
head of research at Williams de Broe.
"However, it appears the downward trend is picking up pace."
Miners also fell sharply, tracking weaker metals prices. BHP
Billiton <BLT.L>, Anglo American <AAL.L>, Antofagasta <ANTO.L>
and Eurasian Natural Resources <ENRC.L>, Rio Tinto <RIO.L> fell
between 1.1 percent and 8.7 percent.
Xstrata <XTA.L>, the world's fifth biggest diversified
mining group by market value, fell 13.5 percent after its
shareholders approved a $5.9 billion rights issue and voted for
the acquisition of a coal mine in Colombia.
Among gainers, Royal Ahold NV <AHLN.AS> rose 1.4 percent
after the Dutch supermarket group posted a higher-than-expected
49 percent rise in fourth-quarter operating profit on revamped
U.S. grocery stores and a solid base in its home market.
Across Europe, the FTSE 100 <> index, Germany's DAX
<> and France's CAC 40 <> were down between 3.5
percent and 5.3 percent.
(Additional reporting by Joanne Frearson; editing by Karen
Foster)
