European shares knocked by debt woes; BP sinks

European shares knocked by debt woes; BP sinks

London: European shares fell on Tuesday, hitting a near two-week closing low, with investors jittery after Fitch Ratings said the UK faced a “formidable" fiscal challenge and BP sinking on fresh oil spill worries.

The pan-European FTSEurofirst 300 index of top shares closed down 1% at 980.35 points, falling for the third consecutive session and down around 11.9% from a mid-April peak on concerns about the euro zone debt crisis.

BP fell 5%, representing a market-cap wipe out of about £4 billion ($5.8 billion) for the company, after US President Barack Obama said he wanted to know “whose ass to kick" over the Gulf of Mexico oil spill.

Other energy companies were under pressure. Royal Dutch Shell, Total and Cairn Energy slipped 0.4% to 0.8%.

“Markets remain under pressure," said Peter Dixon, economist at Commerzbank. “Until we see any indications that uncertainty has lifted, the prospects of any decent rally in the European markets appears distant."

Investors were also nervous after ratings agency Fitch said Britain faced a “formidable" challenge to cut government borrowing and needs more ambitious plans to reduce the deficit over the medium term.

Meanwhile, the European Union said it would press ahead with its own banking levy after the world’s top economies failed to agree on taxing an industry seen as a main culprit behind the global economic meltdown.

Banks featured among the worst performers, falling for the third day. BNP Paribas, UBS, LLoyds Banking Group and Barclays slipped 2.2% to 4.1%.

Utilities weigh

Utility stocks E.ON and RWE fell 3.6% and 2.9%, respectively, after the German government said it planned to introduce a new tax on operators of nuclear power stations.

Tesco lost 2.4% after chief executive Terry Leahy, who built the company into the world’s No.4 retailer, announced his surprise retirement, leaving new boss Philip Clarke to tackle the group’s toughest challenge -- its lossmaking US arm.

Earlier, markets had been encouraged by upbeat remarks from US Federal Reserve chairman Ben Bernanke, who said European leaders are committed to ensuring the survival of the euro and have enough money to meet obligations of heavily indebted member countries.

He also said the US economy appeared to have enough momentum to avoid a “double-dip" recession, citing strengthening consumer and business spending.

Across Europe, the FTSE 100 index was down 0.8%, Germany’s DAX slipped 0.6% and France’s CAC 40 was 1% lower.

Spain’s IBEX 35 was down 1.4%, Portugal’s PSI 20 lost 1.1% and Italy’s benchmark fell 0.5%.