* FTSEurofirst 300 index ends 0.9 percent lower
* Italy sells bond at record yield
* Euro zone banks fall 2.4 pct
By Brian Gorman
LONDON, Nov 14 European share prices fell
on Monday as low prices in an Italian sovereign bond auction
served as a reminder of the credit crunch faced by the country
as Rome works to form a new government.
Italy paid a euro-era high price to sell five-year bonds,
with investors wary of buying its debt until the country's new
leadership undertakes profound economic reform.
"There's still a lot of hard work to do and measures that
need to be put in place. Just because a government's been
changed, that doesn't reduce the debt," said Dean Tenerelli,
fund manager at T Rowe Price, which manages $440 billion.
Italian banks exposed to the country's debt were among the
biggest fallers, having been strong gainers on Friday in
anticipation of Silvio Berlusconi's exit as prime minister.
Intesa SanPaolo and UniCredit fell 4.1
and 6.2 percent respectively. Investors were also absorbing news
of UniCredit's third-quarter loss and plans for a 7.5 billion
euro ($10.3 billion) share sale to repair its balance sheet.
With other banks in the euro zone exposed to Italy's debt,
and other sovereign debt in the troubled region, The STOXX
Europe 600 euro zone Banking Index fell 2.4 percent.
Former European Commissioner Mario Monti worked on Monday to
form a new government, replacing Berlusconi, that will try to
reverse a disastrous collapse of market confidence in Italy.
But in a sign of the fragile state of the markets, an
auction of five-year bonds saw the Treasury forced to pay a
record yield of 6.29 percent, up nearly a full percentage point
from the last auction in mid October.
Last week Italian bond yields rose above 7 percent, before
The FTSEurofirst 300 index of top European shares
fell 0.9 percent to close at 975.47 points, surrendering earlier
gains and in low volume, 77.5 percent of the index's 90-day
"It just feels like ... traders don't want to become too
excited at this stage..... Much uncertainty remains regarding
the European financial crisis. Many are in no rush to enter the
market as they are confident that they will be able to buy
stocks cheaper at a later time," said Markus Huber, head of
German sales trading at ETX Capital.
Italy's FTSE MIB fell 2 percent; Spain's IBEX
fell 2.2 percent.
Spain's borrowing costs also risk hitting euro-era highs at
auction this week, fuelling fears it is getting dragged back
into the heart of the euro zone debt crisis. Secondary market
yields on benchmark Spanish 10-year debt rose to over 6 percent
on Monday for the first time since the European Central Bank
started buying the country's bonds.
The benchmark index is down 13 percent in 2011, as
the euro zone crisis has taken its toll on sentiment, and hit
the outlook for growth. Euro zone industrial production fell 2
percent in September, pointing to a sharp contraction towards
the end of the year and a growing threat of a fall into
HSBC strategists said they expected to see "increased
interest in perceived safe havens as the crisis unfolds".
They added: "Our highest conviction safe havens are telecoms
and energy. Valuations are attractive, large international funds
are underweight and earnings are proving to be resilient."
Vodafone and French oil heavyweight Total
are among its top picks.