By Anshuman Daga
LONDON, Jan 31 (Reuters) - European equities fell nearly 2
percent on Thursday and banks topped losers as Wall Street was
hit by new worries about more losses in the financial sector
which eclipsed another cut in U.S. interest rates.
HSBC <HSBA.L> lost 2.5 percent, UniCredit <CRDI.MI> shed 3
percent and Royal Bank of Scotland <RBS.L> surrendered 4.5
percent. UBS <UBSN.VX>, which unveiled $4 billion in new
write-downs on Wednesday, tumbled 5 percent.
By 0920 GMT, the pan-European FTSEurofirst 300 index
<> was 1.8 percent weaker at 1,305.2, extending an early
fall and adding to Wednesday's 0.7 percent loss.
The DJ Stoxx 600 index <> is limping towards its worst
January on record, down more than 13 percent this month.
"What's surrounding the monoline insurers is very important
for the market because of the consequences it will have for
banks," said Thierry Lacraz, a strategist at Pictet & Cie.
Persistent concerns about more rating agency downgrades to
the top U.S. bond insurers drowned out the cheers for
Wednesday's 50-basis point rate cut by the Federal Reserve.
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"The attitude of the Fed is much more moderate than before.
They are aware that the real threat is more on the financial
side than the real economy," Lacraz said.
Earlier, Asian stocks <.MIAPJ0000PUS> rose 0.8 percent,
brushing aside worries about bond insurers' credit ratings.
BROAD SELL-OFF
London's FTSE 100 <> fell 1.7 percent, Paris's CAC-40
<> lost 1.6 percent and Frankfurt's DAX <> tumbled
1.9 percent.
Losses from the ailing bond insurance sector spread deeper
into European banks on Wednesday as French group BNP Paribas
<BNPP.PA> and Switzerland's UBS posted hefty write-downs. BNP
Paribas fell 2.7 percent on Thursday.
"U.S. futures are getting a knock as there's still quite a
lot of uncertainty about what's going to happen to financials
with concerns about monoline insurers still the main factor,"
said one trader.
"Markets are increasingly coming to terms that the Fed
action is just not enough," he said.
U.S. stock index futures <SPc1>, <DJc1> and <NDc1> were down
0.6 to 0.8 percent.
The fortunes of the bond insurers have now moved to centre
stage in the global credit crisis that began last summer, after
defaults soared on U.S. subprime mortgages, causing losses for
banks, funds, and insurers.
On the results front, shares in engineering firm Sandvik
<SAND.ST> fell 7 percent after the company's fourth-quarter
pretax profit came below market expectations, hit by a higher
than anticipated write-down on its metal stocks.
Vodafone Group <VOD.L> was also caught in the market slide
and its shares dropped 1.6 percent as investors ignored
forecast-beating revenue.
(Editing by Paul Bolding)
