London: European shares hit a two-week low in morning trade on Tuesday, as banks slid on persistent concerns about their balance sheets and fears they might need more state help, while weaker crude prices pressured oil stocks.
At 0936 GMT, the FTSEurofirst 300 index of top European shares was down 1.4% at 773.98 points after touching a low of 770.89. It closed 1.4% lower on Monday.
The index has fallen five times in the previous six sessions and is down 6.9% so far this year after plunging 45% in 2008.
Banks were the biggest sectoral decliner on the index, with Societe Generale down 9%, KBC Groep falling 8.8%, Deutsche Bank shedding 5.4% and UniCredit CRDI.MI down 5.8%.
Concerns over a recession in eastern Europe and the knock-on effect on European banks helped the dollar to rise broadly, while the euro hit a more than two-month low.
Shares in Daimler, which makes Mercedes Benz cars, fell more than 7% after it stopped short of giving a profit forecast for this year after delivering a fourth-quarter loss, weighed down by significant losses and charges at Chrysler.
The stock later pared losses and was down 0.6 percent.
“The beginning of a new year brought with it understandable optimism, but as we move further in to 2009, it is becoming clear that the green shoots of recovery are becoming harder and harder to find,” said Chris Hossain, senior sales manager at ODL Securities Ltd.
“The damning numbers form Japan have sent shockwaves through Europe and the US, with concerns still at the forefront of investors minds on just how bad things are,” he added.
Data showed on Monday that Japan’s economy shrank by 3.3% in the fourth quarter, its worst since the 1974 oil crisis, while a Reuters poll showed on Tuesday that confidence among Japanese manufacturers stayed near record lows.
Investor sentiment remained downbeat in spite of governments around the world pledging hundreds of billions of dollars to shore up bank capital, cut taxes and fund projects that will create jobs, while central banks have pumped funds into the money markets and slashed interest rates.
US Secretary of State Hillary Clinton said the global crisis demanded a coordinated response, while US President Barack Obama was to sign a $787 billion stimulus package.
Energy stocks were under pressure as crude oil prices fell 1.4%, BP, Royal Dutch Shell, Repsol, Total and StatoilHydro shed between 0.8 and 1.2%.
However, InterContinental Hotels, the world’s largest hotelier, rose 1.5% after it met forecasts with a 13% rise in 2008 profit. But the company said a marked fourth-quarter slowdown had continued into 2009 and demand was still easing.