London: European shares were lower at midday on Monday, led by financials after American International Group (AIG) reported a $61.7 billion quarterly net loss and HSBC announced Britain’s largest ever rights issue.
By 1143 GMT, the pan-European FTSEurofirst 300 index of top shares was down 4% or 691.05 points trading at a six year low and just off a lifetime low of 681.17 points. “Everyone had lingering hopes that by the time we were moving towards the end of the first quarter there would be signs the banking industry and world economy would be stabilizing and the pace of declines would be lessening. However, it appears the downward trend is picking up pace,” said Jim Wood-Smith, head of research at Williams de Broe.
Banks were the biggest fallers on the index. HSBC lost 19.6% as it launched a £12.5 billion rights issue after annual profits more than halved.
Sandy Chen, analyst at Panmure Gordon, said: “We interpret HSBC’s move as a signal that management does not expect a recovery in global macro for a long time. In HSBC, we see vulnerability to the collapse in world trade and rising balance sheet risk.”
UBS fell 7.1% after its new chief executive was quoted as saying it could take two to three years to bring it back to making a sustainable profit.
Banco Santander, BNP Paribas and Credit Suisse were down 7.6 to 9.2%.
Insurers were also in the doldrums on concerns they may need to raise capital through rights issues.
Axa, Allianz and Swiss Re fell 4.4 to 7.6%.
AIG’s $61.7 billion fourth-quarter loss was the largest quarterly loss in US corporate history and is its fifth consecutive quarterly loss, bringing total losses over that period to $100 billion.
AIG shares in Frankfurt were up 7.5%, lifted by the bailout news.
Oil stocks were under pressure as crude fell 4.8%. BG Group, BP, Royal Dutch Shell and Total were down 1.7 to 3.75%.
There were no sectors in positive territory.
In individual movers on the upside, Dutch supermarket group Ahold was up 2% after it reported that its fourth-quarter operating profit rose 49%, thanks to its revamped US grocery stores and a solid base in its home market.
Amlin was up 3.1% after the group said the outlook for 2009 and 2010 underwriting is improving and increased its dividend (paid and proposed) by 13.3% to 17.0 pence per share.
In economic news, Euro zone February inflation staged a surprise rebound and was up to 1.2%, compared to 1.1% in January.
Meanwhile, the Euro zone manufacturers had their worst month in at least 12 years in February as a recession showed no signs of easing and firms slashed jobs.
“In January there were signs of stabilization and that gave some hope that a bottom may have been reached. This and other surveys cast doubt on that and suggest Q1 growth in the euro zone could be as bad as Q4, which was pretty disastrous,” said Dominic Bryant at BNP Paribas.
Across Europe, the FTSE 100 index was down 4.4%, Germany’s DAX was down 3.1%, France’s CAC 40 was 3.6% lower, and the broader DJ Stoxx 600 index was down 3.9%.