Shares fall in Europe as Citi euphoria fades

Shares fall in Europe as Citi euphoria fades

London: European stocks bucked Wall Street and Asia to fall more than 1% on Tuesday as euphoria surrounding the US rescue of Citigroup gave way to concerns about sharply deteriorating major economies.

Washington’s announcement late on Sunday to shoulder most losses on about $306 billion of Citi’s risky assets and inject new capital boosted world stocks by 6.6% on Monday.

However, investors were quick to take profits, worrying that more banks might be forced to seek government help and that the rescue plan was unlikely to change the fact that the world economy is slowing fast.

The World Bank said China’s growth - once seen as the engine of the world economy - could slow to 7.5% in 2009, its slowest pace of expansion since 1990, due to the intensifying impact of global financial turmoil.

The FTSEurofirst 300 index of leading European shares fell 1.4%, after rallying nearly 9% on Monday - its second biggest one-day percentage rise on record.

Shares in Rio Tinto fell 36% after top global miner BHP Billiton walked away from its $58 billion hostile offer for the firm.

A 3.4% rise in Asian stocks helped MSCI world equity index post a 0.4% gain. Emerging stocks rose 2.4%.

US crude oil fell 3% to $52.88 a barrel after rising more than 9% on Monday.

The December bund futures rose 17 ticks as European shares slipped. The low-yielding yen rose 0.6% 96.50 per dollar while the dollar rose 0.3% against a basket of major currencies.

US data due later includes a preliminary reading for third-quarter growth. The US economy is expected to have contracted 0.5% in the three months ending September.

Interest rate futures are fully pricing in the Federal Reserve to cut interest rates by half a point to 0.5% in December.