London: European shares were lower at midday on Monday, with banks falling after a Spanish bailout and automakers fell after Washington rejected restructuring plans for General Motors and Chrysler.
At 1057 GMT, the pan-European FTSEurofirst 300 index of top shares was down 2.4% at 719.65 points. The index is down 13.5% in 2009, but has risen 11.5% since hitting a lifetime low on 9 March.
Spanish banks fell after the first intervention in a Spanish bank since the start of the global crisis.
On Sunday, the government said the Bank of Spain would take over the running of regional savings bank Caja Castilla la Mancha and would provide funds to help the bank backed by up to €9 billion in government guarantees.
Banco Popular, Banco Santander and BBVA fell between 4.1 and 5.5%.
Britain, too, suffered a financial setback at the weekend with the collapse of the Dunfermline Building Society, a lender. It looks set to be taken over by the Nationwide, after the government failed to bail it out.
Barclays fell 8.3%, after surging 24.1% on Friday. The bank will not participate in Britain’s asset protection scheme, according to a Bloomberg report. Also, it was downgraded to “sell” from “hold” at SocGen.
Other European banks to fall included BNP Paribas, HSBC, Societe Generale, UBS and UniCredit, all of which were down between 5.3 and 7.6%.
“There’s a worry that the Spanish real estate bubble is going into meltdown,” said Bob Parker, vice chairman of asset management at Credit Suisse.
“And if GM goes into Chapter 11, that could have implications for Europe, with Vauxhall. But let’s not forget we had a splendid rally, and the technical indicators showed that, short-term, the market was looking overstretched.”
Wall Street is likely to extend Friday’s losses when trading begins at 1330 GMT.
Futures for the Dow Jones, S&P 500 and Nasdaq were down between 2.3 and 2.5%.
The Barack Obama administration said it would only fund GM for the next 60 days, while it develops a more convincing restructuring plan, with GM chief executive Rick Wagoner forced out and being replaced by chief operating officer Fritz Henderson.
In Europe, Daimler, BMW, Volkswagen and Fiat were down between 5.6 and 7.7%.
General Motors shares in Frankfurt were down 11.8%.
Peugeot fell 7.2% after replacing its chief executive
Across Europe, the FTSE 100 index was down 2.1%, Germany’s DAX was 3.4% lower and France’s CAC 40 was down 2.8%.
Oils were a major drag on the index, with crude prices sliding more than 3%, to $50.60 a barrel.
Total, ENI, BP, Royal Dutch Shell, and Repsol fell between 2.4 and 3.1%.
Credit Suisse’s Parker added that the markets were also hit by remarks from US Treasury secretary Tim Geithner that banks would still require “large amounts of assistance” and by worries over a potential lack of unity at the G-20 summit this week.