London: European stocks were down early on Monday, led by the banks and energy stocks, as investors worried about corporate profits.
By 0932 GMT, the pan-European FTSEurofirst 300 index of top shares was down 2.8% at 774.45 points.
“Third week of heavy earnings reporting with around 60% of S&P companies still to come - this is another nervous week. It’s all about earnings.” said Bernard McAlinden, market strategist at NCB Stockbrokers in Dublin.
Euro zone manufacturing business shrank at a slightly slower pace in January while factory prices plunged at their fastest rate in at least six years, a survey showed, leaving scope for further ECB rate cuts.
“The stabilization in the PMI is of course welcome, but the data is far from suggesting the manufacturing sector is out of the woods,” said Martin Enlund, economist, Handelsbanken.
Banks took the most points off the index. The DJ European banks index is down around 14% for the year after falling nearly 65% in 2008.
French bank BNP Paribas dropped 14% after it said it expected a revised deal to buy assets of stricken Belgian-Dutch financial group Fortis to have a neutral pro-forma impact on its Tier 1 ratio.
The stock gained 40% last week.
Barclays tumbled nearly 12% after Moody’s slashed it’s long-term rating on Barclays Bank, citing expectations for “significant” further losses due to credit-related writedowns and rising impairments.
HSBC, Banco Santander, Societe Generale, Credit Agricole and UBS were down 3.2-7.3%.
Across Europe, the FTSE 100 index was down 2.3%, Germany’s DAX was 2.9% lower and France’s CAC 40 slipped 3.1%.
Rio Tinto surged 4.2% after two sources with direct knowledge of the situation said state-owned Chinese aluminium firm Chinalco is in talks with China Development Bank to secure financing for a potential deal with the mining giant.
Other miners were on the downside as copper slipped 2.9%, while gold fell more than 1% after speculators booked profits from a rally to a near four-month high.
Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation and Xstrata were 1.7-4% down.
Energy stocks were heavyweight losers as crude retreated 1.6%. BG Group, BP, Royal Dutch Shell and Total were down 0.8-1.4%.
Irish airline Ryanair gained 3.8% after chief financial officer Howard Millar said it expects to report a higher profit in its 2009/10 business year than in the current year ending in March.
Investors also turned to the safety of defensive stocks with tobacco the only sector not in the red.
Later in the session, investors will eye the US manufacturing PMI figures due out at 1500 GMT.