European shares plunge on sell-off in French banks

LONDON Wed Aug 10, 2011 11:50am EDT

LONDON (Reuters) - European shares ended sharply down on Wednesday, led lower by a steep sell-off in banking shares, with Societe Generale (SOGN.PA) down more than 21 percent at one point on a slew of rumors about the bank.

A SocGen spokeswoman categorically denied all rumors relating to the bank's financial solidity, but the bank's shares were still down 14.7 percent after hitting a 2-1/2-year low and witnessing their biggest daily percentage decline in more than two decades. Credit Agricole (CAGR.PA) fell 11.8 percent, while the European banking index .SX7P was down 6.5 percent.

"We are running short of triple-A countries. If France is downgraded, that raises issues about other countries as well. Fundamentally public finances are not very strong," said Klaus Wiener, chief economist at Generali Investments, which manages 330 billion euros ($469 billion).

"It's very unfortunate to see all this action at this point in time when we have a very fragile market environment."

The FTSEurofirst 300 .FTEU3 of leading European shares provisionally finished 3.8 percent lower at 911.65 points. France's CAC 40 .FCHI index slipped 5.5 percent.

(Reporting by Atul Prakash)