London: European shares hit a 26-month low on Monday, led by financials on concerns that policymakers are failing to find a permanent solution to the euro zone sovereign debt crisis and as fears of a Greek default intensified.
French banks, which have high exposure to debt issued by peripheral euro zone countries, were particularly hard hit on worries that they could be downgraded by credit ratings agency Moody’s after a three-month review.
BNP Paribas, Societe Generale and Credit Agricole fell between 11.1%-12%.
The STOXX Europe 600 Banks index was down 4.7%, the worst-performing sector, reaching its lowest level since March 2009.
Compounding investors’ worries was the lack of detail on steps to boost the struggling economies from a meeting of the Group of Seven (G7) finance chiefs over the weekend, while German politicians were increasingly talking about a potential Greek default.
“This is clearly not good news for the market. It is bad news for the banks and the equity markets; it just keeps them under pressure,” said Mike Lenhoff, chief strategist at Brewin Dolphin.
By 01:39 pm, the pan-European FTSEurofirst 300 index of top shares was down 3.3% at 885.15 points after dropping 2.6% on Friday when German policymaker Juergen Stark quit the European Central Bank’s board due to divisions over its bond-buying programme.
The German DAX was down 3.3% at 5,019.58 having earlier dropped to 4,993.07.