By Peter Starck
FRANKFURT, June 4 (Reuters) - European stocks fell on
Wednesday as heavyweight energy shares tracked oil prices lower
and financial sector woes returned to haunt banks, with French
bank Societe Generale <SOGN.PA> among shares worst hit.
The FTSEurofirst 300 <> index of top European shares
was down 1.6 percent at 1,307.48 points at 0916 GMT. It rose
0.75 percent on Tuesday.
Remarks on Tuesday by Federal Reserve Chairman Ben Bernanke
that the weak dollar was adding to price pressures sparked a
rally in the U.S. currency and was seen by some market watchers
as a sign that the Fed will not cut interest rates further.
"It's a signal of a stop to Fed rate cuts," said
Giuseppe-Guido Amato, equity strategist at Lang & Schwarz
brokerage in Duesseldorf, Germany.
Oil prices fell as the dollar rose, and oil shares slipped.
Total <TOTF.PA>, BP <BP.L> and Shell <RDSa.L> all lost more than
2.5 percent and were the biggest drag on the FTSEurofirst 300
after Vodafone <VOD.L>, which fell 4.5 percent after trading
without the right to the latest dividend.
U.S. stocks fell on Tuesday but Japan's Nikkei <>
climbed on Wednesday, helped by exporters thanks to the weaker
yen <JPY=>.
"The U.S. dollar should continue to find support today from
Bernanke's comments, but will be vulnerable to news of further
problems emanating from the credit crisis," ABN AMRO said in a
note.
The DJ Stoxx European bank index <.SX7P> was down 1.7
percent, with Societe Generale 4.3 percent lower. UK banks HBOS
<HBOS.L> and Barclays <BARC.L> both dropped more than 3 percent.
"It's the increasing uncertainty concerning financial
shares, this theme has returned," Amato said.
"We may have seen the peaks already," he said, predicting
further market jitters in the run-up to the release of big U.S.
banks' interim reports for the quarter to end May, notably
Lehman Brothers.
The DJ Euro STOXX50 index <> of European blue-chip
shares advanced 14 percent between mid-March and mid-May but has
since run out of steam. It was down 1.6 percent at 0900 GMT.
"Market sentiment remains volatile," UniCredit said in a
note.
MORE WRITEDOWNS
Citing recurring reports that Lehman is looking to raise
capital, one trader said the ongoing credit crisis was putting a
damper on stock market sentiment. "This story is entering the
next round," the trader said.
JPMorgan, in a research note on continental European
wholesale and investment banks, said it expects additional
pretax writedowns this year of 3.6 billion euros at Deutsche
Bank <DBKGn.DE>, 2.1 billion Swiss francs at Credit Suisse
<CSGN.VX>, 1.8 billion euros at Societe Generale and 1.4 billion
euros at Natixis <CNAT.PA>.
"Capital raising risk is limited now for European banks due
to markdowns except in the UK. However capital remains scarce
within the banking industry and we see ongoing pressure to
de-leverage driven by credit investors, rating agencies, and
local regulators," JPMorgan said.
"Consensus expectations remain too high for 2009," it said.
Away from financials, shares in index heavyweight Vodafone
<VOD.L> fell 4.3 percent, trading ex-dividend.
French construction to telecoms group Bouygues <BOUY.PA>
fell 5.1 percent after first-quarter earnings failed to impress
investors.
Shares in British home-improvements retailer Kingfisher
<KGF.L> were down 2.7 percent after the company cut its
full-year sales growth forecasts, citing tough trading.
Britain's services sector contracted for the first time in
more than five years last month. The Chartered Institute for
Purchasing and Supply/NTC purchasing managers' index (PMI) fell
to 49.8 -- the lowest reading since the start of the Iraq war in
March 2003 and below analysts' forecasts for a reading of 50.4.
The euro zone services PMI survey showed sector growth
slowing close to contraction in May while price pressures grew.
"The weak services purchasing managers' survey adds to the
growing evidence that euro zone economic activity is now slowing
significantly," said Howard Archer at Global Insight.
The closely watched U.S. May services PMI number is due at
1400 GMT.
(Editing by Quentin Bryar)
