European markets fall on high oil prices, bank worries - European commentary

Fri. June 20, 2008; Posted: 03:21 PM

(RTTNews) - The European markets fell for the third day on Friday, as escalating worries about the banking sector and a rebound in crude oil prices dampened investor sentiments.

France's economy will expand by 1.6% this year, the slowest pace in five years, the government's statistics office said. Crude for July delivery traded up $3.44 at $135.37 a barrel on the New York Mercantile Exchange, by the time the European markets closed. The contract as high as $136.80 earlier in the session after the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

The FTSEurofirst 300 index of pan-European blue chips closed 1.8% lower at 1,222.51 points, while the narrower DJ Stoxx 50 index fell 1.8% to 2,923.37 points.

Around Europe, the U.K.'s FTSE 100 index fell 1.53% to 5,620.80. HBOS, Royal Bank of Scotland, Barclays, British Airways, Imperial Tobacco, Wolseley, BP and Royal/Dutch Shell were among the major losers, while Antofagasta, Vedanta Resources, Persimmon, Sainsbury, Land Securities and Tullow Oil were among the top gainers.

France's CAC 40 index slipped 1.79% to 4,509.27. BNP Paribas, Air France-KLM, Michelin, Alcatel-Lucent, STMicroelectronics, Danone, Schneider Electric and Vivendi were among the notable losers.

Germany's DAX index dropped 2.12% to 6,578.44. Commerzbank, Deutsche Bank, Lufthansa, Siemens, Bayer, BASF and Infineon were among the major losers.

UBS, Switzerland's largest bank, slipped 3.3% and Deutsche Bank, Germany's biggest lender, fell 3.1% after Lehman Brothers Holdings Inc. cut earnings estimates for the banks. UBS may report $5.5 billion in writedowns and Deutsche Bank may write down 1.9 billion euros in the second quarter, Lehman analysts said.

HBOS, Britain's biggest mortgage lender, lost 4.9% Standard & Poor's cut its credit outlook for the bank.

Barclays, Britain's third largest bank, fell 2.4% on news that the bank may get about 100 billion yen from Japan's Sumitomo Mitsui Financial Group Inc. as part of a plan to restore depleted capital.

Oil sensitive airline stocks lost ground, as crude oil prices rebounded. Air France-KLM, Europe's largest airline, slid 2%, while Lufthansa, the second largest, fell 1.9% and British Airways, the third largest, dropped 3.2%.

Heavily weighted oil stocks also slipped despite a surge in crude oil prices, as investors booked profits from the sector's recent gains.

Fiat, Italy's biggest carmaker, slipped 6.5% after the company's Chief Executive Officer Sergio Marchionne forecast a disastrous car market in Italy this month. Wolseley, the world's biggest distributor of plumbing and heating equipment, lost 5.3% after Morgan Stanley downgraded the stock to ''underweight'' from ''equal-weight'' on concern the housing slowdown will deepen.

On the other hand, Barratt Developments, Britain's second largest homebuilder, jumped 12% on news that the company was in talks with banks to refinance part of its 1.7 billion pound debt.

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