Credit Jitters, Weak Techs Weigh on Europe Stocks
European equities slid to their lowest close in seven weeks on Friday as investors continued to dump banking shares on persistent credit worries and as tech stocks tumbled on fears over the outlook for the sector.
The FTSEurofirst 300 index of top European shares closed down 1.6 percent at 1,511.57 points, after losing as much as 2 percent in late trading.
Europe's benchmark index, down 5.3 percent so far this month, finished the week with a loss of 3.1 percent, its worst weekly performance since the last week of July.
European shares edged higher at the opening, helped by mergers and acquisitions activity in the mining sector, before banking shares resumed their fall as U.S. lender Wachovia reported big credit losses.
The fourth-largest U.S. bank said it had incurred about $1.1 billion of further losses in October from credit market turmoil, joining a growing list of financial companies -- including Citigroup, Merrill Lynch and Morgan Stanley -- that have reported losses from worsening conditions in consumer credit and capital markets.
"Don't touch the banks, financial services and insurance companies. It's not just a matter of writing off some loans, it's also the ongoing effect of the credit crunch that hits their business," said Pierre Sabatier, strategist at FactSet, in Paris.
Investors worry that financial institutions have not yet revealed the full impact of the turmoil triggered by the U.S. subprime mortgage market problems in their books.
"So far, European banks have not been hit as hard as their U.S. peers by the troubles in the subprime market, but as long as investors are not sure that all the bad news are out, there will be no rebound," Sabatier said.
Shares of European banks were hammered again, with UBS down 4.1 percent, Royal Bank of Scotland down 3 percent, and BNP Paribas down 2.7 percent.
Barclays ended down 2.4 percent, having denied market rumors that it was about to reveal a $10 billion writedown.
The DJ Stoxx European banks index, down 2.1 percent on the day, has lost 18 percent in the year so far, while the FTSEurofirst 300 is up 1.9 percent over the same period.
On the year, UBS is down 31 percent, RBS down 39 percent, BNP down 17 percent, and Barclays down 35 percent.
Tech Shares Suffering
"It's still too early to jump back into the banking sector. You don't want to catch a falling knife," said Achim Matzke, European stock indexes analyst at Commerzbank, in Frankfurt.
"Everyday, there is a guy that says: 'now is the time to buy'. That day will come, but it will take time. For now, we still see 'sell' signals."
Tech shares also took a beating, hit by concern over the outlook for the sector after a lower-than-expected forecast from Qualcomm and downbeat comments from Cisco Systems.
Nokia tumbled 4.2 percent, Alcatel Lucent shed 3.9 percent, SAP fell 1.7 percent, and Ericsson lost 3.5 percent.
In the mining sector, Rio Tinto continued to rise on BHP Billiton's bid approach.
Rio surged 6.2 percent while BHP lost 1.7 percent, and other mining shares ended in the red, with Xstrata down 2.6 percent and Anglo American down 4.4 percent.
The rising euro also weighed on European shares, as a stronger currency dampens exporters' competitiveness. The euro hit a record high against the dollar on Friday, on worries that the Federal Reserve could further lower interest rates to ease the credit crisis.
Securitas dropped 4 percent after a quarterly report from the security services firm showed weaker profit than expected and fuelled worries over its troubled cash handling business.
Friends Provident tumbled 7.2 percent, hit by a price target cut from UBS and fresh worries over its future strategy after its merger with rival Resolution fell through.