Oil and Gas

Banks, commods drag European shares down by midday

* FTSEurofirst 300 falls 1 pct * Commodities stocks track weaker metals, crude prices * BT Group jumps as beats earnings forecast

LONDON, Nov 13 (Reuters) - European shares headed lower by midday on Thursday, as mounting concerns of a prolonged global recession prompted investors to dump financial stocks, while commodities shares tracked weaker metals and crude prices.

At 1143 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 1 percent at 845.53 points -- the third straight day of losses. It closed 3.4 percent lower in the previous session and has lost nearly 44 percent this year, hammered by the credit crisis and resulting economic slowdown.

Banking shares were broadly lower, with Royal Bank of Scotland RBS.L falling 7 percent, HBOS HBOS.L slipping 8.8 percent, Barclays BARC.L shedding 5.7 percent and KBC Groep KBC.BR down 6.3 percent.

UBS UBSN.VX slipped 3.1 percent after U.S. authorities charged the Swiss bank's wealth management chief with conspiring to help wealthy Americans to hide $20 billion from the taxman.

Commodity stocks came under pressure as key base metals prices declined. Copper hit a three-year low, crude oil touched a 22-month trough and nickel prices fell nearly 4 percent.

But telecom shares rose, led by Britain's BT Group BT.L which beat second-quarter earnings forecasts and announced 10,000 job cuts and a possible boost to its pension scheme. BT shares were up 8.8 percent.

Investors remained nervous on concerns that the financial crisis was plunging the world into a painful downturn.

Valerie Plagnol, chief strategist at CM-CIC Securities in Paris, said: “This is a case study of a massive deflationary economic situation that is building up. There is no doubt we are entering into a recession and it could be pretty nasty and deep.

“At this point, it’s hard to say that we have completely avoided the risk of a depression and that’s probably one of the reasons why the market is still extremely weak and nervous.”

Some economists define a recession as a widespread decline in GDP and employment, lasting from six months to a year, while a depression is a long-term economic state characterised by unemployment, low prices and low levels of trade and investment. German gross domestic product contracted by 0.5 percent in the third quarter, putting Europe’s largest economy in recession for the first time in five years, while China industry output growth dropped to its lowest in seven years. [ID:nLD496344]

Governments around the world have pledged around $4.6 trillion for bank bailouts, credit guarantees and fiscal spending to contain the damage from the financial turmoil, which began when the U.S. housing market collapsed.


Energy stocks tracked crude oil prices CLc1, which fell for a third straight day to hit a 22-month low, as mounting economic pessimism outweighed comments by OPEC that it could cut output again as early as end-November.

BP BP.L, Royal Dutch Shell RDSa.L, gas producer BG Group BG.L, Cairn Energy CNE.L and Tullow Oil TLW.L shed between 1.9 percent and 5 percent.

Miners were also weaker. BHP Billiton BLT.L, Anglo American AAL.L, Vedanta Resources VED.L, Lonmin LMI.L, Kazakhmys KAZ.L, Xstrata XTA.L, Antofagasta ANTO.L and Rio Tinto RIO.L fell 1.1 to 5.8 percent.

Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC-40 .FCHI were down between 0.6 and 1.9 percent.

Among individual companies, Swiss insurer Zurich Financial Services AG ZURN.VX fell 5 percent after it reported a below-forecast 15 percent drop in its nine-month business operating profit to $4.2 billion, hit by hurricane claims and capital losses, and it suspended share buybacks.

German engineering group Siemens SIEGn.DE maintained its financial targets for the 2008/09 business year after fourth-quarter new orders rose four percent despite a global credit crunch. Its shares were up 0.2 percent.

French power giant GDF Suez GSZ.PA maintained its target of increasing gross operating profit, which rose 19 percent in the first nine months, by at least 10 percent in 2008 as a whole. Its shares were up 2 percent. (Reporting by Atul Prakash; Editing by Hans Peters)