European Stocks Fall on Writedown Fears

European shares ended lower on Monday, led by Swiss bank UBS on concerns about further asset writedowns.

Volumes were thin due to holidays in the United States and Britain, traders said.

The FTSEurofirst 300 index of top European shares ended unofficially 0.1 percent lower at 1,320.63 points, having fallen 3.2 percent last week.

UBS dropped 5.8 percent after saying in the prospectus for its upcoming $15 billion rights issue that it may suffer additional losses from its exposure to U.S. residential mortgages.

UBS "continues to hold positions exposed to the United States residential mortgage and may record additional losses to such exposures," the bank said.

UBS will trade ex-rights on Tuesday and some traders said this was also already weighing on the company's stock.

UBS is Europe's largest subprime casualty so far, having written down $37 billion of assets hit by the U.S. subprime lending crisis.

Oil hovered around $133 a barrel, with concerns on long-term supply high on the agenda.

"The focus remains on oil prices, with concerns arising on how a number of sectors will cope with that. We've seen a sharp correction last week on airline stocks after company outlooks, citing high oil prices, disappointed the market," said Benoit De Broissia, analyst at Richelieu Finance, in Paris.

"The pressure from rising commodity prices is now so great that it reignites fears of second-round inflation, with wage hikes," he said.

The rise in oil prices aggravated existing worries among investors over inflation and stripped more than 2 percent off Japan's Nikkei overnight.

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