Europe Markets

Banks, Miners Weigh on Euro Markets


European shares closed broadly lower Tuesday, as gains in oil majors BP and Shell were offset by weaker mining stocks and banks after Deutsche Bank reported further writedowns.

The banking sector was among the strongest negative weights on the index with Deutsche Bank down 0.4 percent after posting further writedowns and HBOS down 1.8 percent after the British bank made a 4 billion pound ($7.9 billion) cash call.

Deutsche Bank suffered its first quarterly loss in five years as the global financial turmoil heaped more than $4 billion in writedowns on the bank.

"The size of the writedowns weighs," said Christian Stocker, equity strategist at UniCredit Global Research.

Deutsche Bank also retreated from giving further guidance for the currently year, saying uncertain markets made a forecast impossible.

"It shows that Deutsche Bank is also uncertain about business developments this year and the market doesn't like this," Stocker said.

HBOS, Britain's biggest mortgage lender, is the second major UK bank in days to turn to investors with a deeply discounted rights issue, after Royal Bank of Scotland last week.

"The rumor was already in the market yesterday, but today's confirmation now weighs on the sector," Stocker said.

"It may be negative in the short term, but in the long term it could certainly be positive, because the bank is strengthening its capital base in order to be able to outperform again in the future."

Mining shares added to the weaker trend with BHP Billiton down 3.1 percent, Rio Tinto down 3.4 percent and Anglo American down 2.8 percent.

On the upside, BP and Royal Dutch Shell rose nearly 6 percent each after both oil giants posted forecast beating first-quarter results.

"Oil and gas stocks are very, very positive after good earnings from BP and Shell, also driven higher by the high oil price," Stocker said.

Oil prices fell below $116, after Monday's record high at $119.93 a barrel.

Automotive Stocks in Focus

Among major decliners, shares in Michelin dropped 9.2 percent after the French tire group cut its forecast for 2008 operating income, which also weighed on German auto parts maker Continental, falling 0.6 percent.

But Continental stuck to its forecast as it posted a 29 percent rise in first-quarter underlying operating profit.

Elsewhere in the sector, Daimler's first-quarter earnings before interest and taxes (EBIT) fell a worse-than-expected 40 percent to 1.98 billion euros as one-off charges weighed.

Daimler shares were down 1.4 percent.