London: European shares fell early on Monday, as banks slipped on a plan to raise the UK government’s stake in Lloyds Banking Group and as HSBC short-sellers dumped its stock.
By 0941 GMT, the pan-European FTSEurofirst 300 index of top shares was down 1.8% at 650.25 points, while the broader STOXX 600 was down 1.9% at 156.55 points, after earlier hitting its lowest level since September 1996.
“With HSBC there are worries about credit quality ... There is not a whole lot that is bright news out there anywhere today. There are doubts everywhere that policy response can not actually stabilize the global economy,” said Bernard McAlinden, strategist at NCB Stockbrokers.
Banks were the major losers, with Lloyds down 14% after it said over the weekend the British government would get a stake of up to 77% in the bank after agreeing to underwrite £260 billion of risky assets.
“With Lloyds the issue is the government has ownership but not control, so it does not resolve the underlying problem. The government really cannot push through policy, and it is possible this could be a step towards full nationalization or (the) suspension of shares, as per Northern Rock,” said Justin Urquhart Stewart, director at Seven Investment Management.
HSBC lost 11% as short sellers dumped the stock in anticipation of buying back after the bank completes its $17.7 billion rights issue.
Credit Suisse fell 3.9% after the group and Swiss Re both announced a shake-up of their boards, with Credit Suisse’s Walter Kielholz to become chairman at Swiss Re and Hans-Ulrich Doerig to take the same position at Credit Suisse.
Swiss Re was down 0.6%.
Fortis gained 22% after the Belgium government and BNP Paribas revised the terms of the break-up of the financial group.
However, BNP Paribas was down 0.4%.
Deutsche Bank was 0.8% higher after Germany’s largest bank said it booked revenues in February that confirmed a positive trend seen in January.
Roche was up 0.2% after the group raised a $45.7 billion bid to buy out US biotech group Genentech.
UK-based oil explorer Tullow Oil was 6.8% higher after it said it had secured a $2 billion loans package that will finance the development of its large oil finds offshore Ghana, as it announced another find in the West African country.
Elsewhere in the energy sector, BG Group, Royal Dutch Shell and Total were down between 1.5 and 2.6%, while crude hovered at around $45 a barrel.
Across Europe, the FTSE 100 index was down 1.6%, Germany’s DAX was 1.7% lower and France’s CAC 40 was down 2.2%.