London: European shares opened 1% lower early on Wednesday, joining a global sell-off as investors feared a $2 trillion US bank rescue plan would not be enough to prop up the troubled financial system.
The FTSEurofirst 300 was down 1% at 797.8 points by 3:50pm. The index of top European shares lost 2.9% on Tuesday.
Banks led the decliners in Europe. Credit Suisse dropped 1.8% after Switzerland’s second-largest bank posted a fourth-quarter net loss of $5.2 billion, its biggest annual loss ever, due to poor trading performance and restructuring charges.
US stock futures pointed to a slightly higher start after falling sharply the day before. Asian stocks fell too, with sentiment hurt further after Chinese exports and imports fell more than expected in January.
Investors worldwide were sharply disappointed by the lack of detail on how the US government will cleanse toxic assets burdening the financial system.
“They’ve given it a fancy name (but) there’s a huge amount of uncertainty,” Peter Dixon, an economist at Commerzbank in London, said of the US plan.
Among banks, Barclays shed 3% and Banco Santander lost more than 1%.
Meanwhile, shareholders of Fortis will give their verdict on Wednesday on the state-led deals that carved up their stricken financial group and left them with huge losses and a share of toxic assets.
Sweden’s central bank slashed its key interest rate by a full point to a record low 1.0% on Wednesday as it sought to bolster a rapidly deteriorating economy.
European Central Bank Executive Board Member Jose Manuel Gonzalez-Paramo said, meanwhile, that 2% is not the lowest level for European Central Bank interest rates.
The ECB held rates at 2.0% at its February meeting but policymakers have signalled a cut is likely in March.
PSA Peugeot Citroen dropped 3.3% after saying it does not expect to return to profit until 2010 after it made an unexpected loss for 2008 following hefty writedowns, as the global economic crisis puts the brakes on car sales.
Renault shed 4.4%.
Leading the gainers, Vestas added 5.8% after the world’s biggest wind turbines maker posted a better-than-expected 51% rise in 2008 operating profit and repeated its 2009 sales and profit forecasts.
Shares in Rio Tinto gained 3% on hopes the global miner would announce a deal with top shareholder Chinalco to help slash its $39 billion debt burden when it announces results on Thursday.