RTRS: European stocks at 3-week low on E.Europe worries
European shares were at three-week lows midday on Tuesday as banks fell on fears of more losses and the impact of a recession in emerging Europe, while heavyweight energy stocks lost ground along with the oil price.
At 1145 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 2.1 percent at 768.86 points, taking its loss for the year so far to 7.5 percent following a 45 percent decline in 2008.
Banks took most points off the index, with HSBC (HSBA.L) down 5.3 percent after Morgan Stanley said it was staying underweight on the stock and becoming more bearish on the outlook for profit in 2009 and 2010.
Ratings agency Moody's said the recession in emerging European economies would be more severe than elsewhere due to large imbalances and would put the financial strength ratings of local banks and western parents under pressure.
Societe Generale (SOGN.PA), Raiffeisen (RIBH.VI) and KBC (KBC.BR) fell 9-12 percent, while Standard Chartered (STAN.L) lost 8.8 percent, Santander ,SAN.MC> fell 5.3 percent and UBS (UBSN.VX) lost 5.7 percent.
The euro fell to a two-month low versus the dollar, and gold rose more than 2 percent to a seven-month high on the eastern Europe worries and after Russia's central bank said it planned to buy more of the precious metal.
"The news on emerging Europe is important, especially for countries like Austria and Germany and for certain banks. The focus today is on the banks but it is also valid for the manufacturing sector," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.
"Any further escalation of troubles in emerging Europe would make more capacity cuts necessary and make it harder for the manufacturing base to get ahead of the curve in terms of cost cutting and inventory reduction," he said.
"It is one more stress point for equity markets. We are waiting for details on the Geithner plan, and there has been a 'yes-no' discussion in Germany for weeks on a bad bank. We need answers but unfortunately the questions are increasing and that is what equity markets don't like," he said.
Across Europe, the FTSE 100 index .FTSE, Germany's DAX .GDAXI and France's CAC 40 .FCHI were 2.4-2.7 percent lower.
