* FTSEurofirst 300 ends 1.8 percent lower
* Bank stocks fall on liquidity concerns
* Stock market recovery hinges on fate of bailout package
By Sitaraman Shankar
LONDON, Sept 26 (Reuters) - European shares slipped on Friday as money
markets stayed under stress and liquidity worries grew, while pressure mounted
on U.S. lawmakers to agree on a $700 billion financial sector rescue plan.
Belgian-Dutch bank Fortis <FOR.AS> <FOR.BR> plunged 20 percent despite
denying it was facing a liquidity crisis and pledging to speed up asset sales,
while German property lender Hypo Real Estate <HRXG.DE> slid 9.8 percent.
The FTSEurofirst 300 index of top European shares ended 1.8 percent lower at
1,104.79 points, with banks taking most points off the index and commodity
stocks tracking metal and oil prices sharply lower.
Royal Bank of Scotland <RBS.L>, Credit Suisse <CSGN.VX> and Credit Agricole
<CAGR.PA> lost 5.7-6.6 percent. Deutsche Bank <DBKGn.DE>, which declined comment
on market talk of interest in Fortis, traded down 2 percent.
But BNP Paribas <BNPP.PA>, subject of speculation as a possible bidder for
Fortis, rose 1.6 percent as rumours of other interested parties swirled.
"Money markets are more seized up than ever, liquidity issues are more
prevalent than ever," said Bernard McAlinden, strategist at NCB Stockbrokers in
Dublin.
"So severe is the crisis of confidence that any bank that has funding or
leverage issues, quite apart from the quality of assets, is unnaturally
vulnerable in the current environment," he said.
Miners Rio Tinto <RIO.L> and BHP Billiton <BLT.L> slipped 6 and 4.9 percent
respectively, and energy stocks across Europe weakened as oil fell by around
$2.70 to just above $105 a barrel. BP <BP.L>, Royal Dutch Shell <RDSa.L> and
Total <TOTF.PA> lost 1.6-1.9 percent.
But investors were focused strongly on the U.S. bailout plan. Talks broke
down in acrimony and a group of conservative Republicans proposed an alternative
plan on Thursday.
U.S. President George W. Bush said that while there were disagreements on
parts of the bailout plan, Congress would pass the bill.
"I'd be surprised and shocked if some deal doesn't come out of this. There
are enough guys in there to let politicians know clearly what sort of deal won't
wash in the market, and it's a brave politician who will take responsibility for
an adequate deal not emerging," said McAlinden.
Britain's FTSE 100 <> lost 2.1 percent, Germany's DAX <> fell 1.8
percent and France's CAC <> declined 1.5 percent.
VOLUMES FALL
Reuters data showed that share volumes fell sharply during the week, the
first full week of trade after several countries instituted a ban on
short-selling financial shares.
The number of German shares traded in Deutsche Boerse's <DB1Gn.DE>
electronic orderbook, Xetra, was down by 22 percent at on average 219.8 million
per day in the Sept. 22-25 period from a daily average of 283.2 million shares
during Sept. 1-19, the exchange's website showed.
The FTSEurofirst 300 has fallen 4 percent this week, 7.5 percent this month
and nearly 27 percent so far this year, punctured by a global credit crisis that
has piled up the losses at financial institutions and slowed the economy.
The backdrop continued to be bleak after U.S. regulators seized bank
Washington Mutual Inc on Thursday.
Data showed the U.S. economy grew less strongly than previously thought
during the second quarter as consumers boosted spending less vigorously and
businesses trimmed some investments, a sign confidence was sagging even before
financial market turmoil deepened.
Among other individual movers, British grocer Sainsbury <SBRY.L> rose 3
percent on lingering market talk of a bid, to which it offered no comment, while
UK housebuilders Taylor Wimpey <TW.L>, Barratt <BDEV.L> and Bovis Homes <BVS.L>
fell 5.7-7.4 percent on concerns of a poor autumn for house sales.
Analysts said how markets opened on Monday would hinge almost entirely on
whether a deal was reached on the bailout plan.
"Timing is the key issue here; if a deal hasn't been signed and sealed over
the weekend, expect massive market turmoil. Monday will be a bloodbath," said
Martin Slaney, head of derivatives at GFT Global Markets in a note.
(Additional reporting by Peter Starck in Frankfurt; Editing by Paul Bolding)
