London: European shares fell sharply on Friday, led lower by banking stocks, after investment bank Goldman Sachs was charged with fraud by the US Securities and Exchange Commission (SEC).
The SEC charged Goldman in relation to the structuring and marketing of a debt product tied to subprime mortgages.
The FTSEurofirst 300 index of top European shares fell 1.5% to close at 1,095.30 points. Over the week, the index fell 0.6%, ending six straight weeks of gains.
The European benchmark is up more than 69% from its lifetime low of 9 March 2009.
“If someone like Goldman Sachs is being sued this is painful for the entire industry,” said Heino Ruland, strategist at Ruland Research, in Frankfurt.
“But this is a one-time event. I don’t think it will carry into next week, as there is a lot of data and earnings for investors to focus on.”
Goldman Sachs shares fell 15% in New York.
European banks to fall included BNP Paribas, Banco Santander, Barclays, Deutsche Bank, Credit Agricole and HSBC, down between 2 and 7.3%.
Royal Bank of Scotland bucked the trend in the sector, rising 5.1% after BofA Merrill Lynch hiked its target and said the shares could double on a two-year view.
Commodities stocks fell on lower metals and crude prices slipped, as the dollar strengthened.
Miners Anglo American, Antofagasta, BHP Billiton, Kazakhmys , Lonmin, Rio Tinto, and Xstrata fell between 3 and 4.4%.
Total, BP and Royal Dutch Shell fell between 1.1 and 1.7%.
Across Europe, Britain’s FTSE 100 ended the day 1.4% lower; Germany’s DAX and France’s CAC40 fell 1.8 and 1.9%, respectively.
Wall Street was lower around the time European bourses were closing. The Dow Jones, S&P 500 and Nasdaq Composite were down between 1 and 1.5%.
Both General Electric and Bank of America fell, despite strong results, as the Goldman issue hurt sentiment.
US economic news was mixed. Permits to build new US homes unexpectedly surged in March to their highest level in more than 1-1/2 years, but a surprise dip in consumer confidence tempered optimism.
Among individual stocks, retailer Carrefour gained 1.4% after it posted its first rise in underlying quarterly sales for 18 months and unveiled a €1.6 billion share buyback to reflect confidence in its recovery plan.
But British supermarket giant Tesco, which reports on Tuesday, fell 1.8%.
SKF, the world’s biggest bearing maker, jumped 5.8% after reporting better-than-expected first-quarter results. Its peer engineering group Sandvik gained 4.7%.
Airline stocks were hurt as a huge ash cloud from an Icelandic volcano caused further air travel chaos across Europe on a scale not seen since the 11 September attacks, leaving hundreds of thousands of passengers stranded.
Lufthansa, British Airways, Air Berlin, Air France-KLM, Iberia and Ryanair fell between 2.5 and 4.1%.