Weaker financials, oils push European stocks down

European equities ended lower yesterday as poor economic data and persistent concerns about losses at banks hit financial stocks, while commodity shares tracked weaker base metals and crude oil prices.

The FTSEurofirst 300 index of top European shares closed 1.4 per cent lower at 785.30 points in thin trade, with US markets closed for the President's Day Holiday and UK volumes lighter due to school mid-term holidays.

Banks took the most points off the index, with Royal Bank of Scotland slipping 6.4 per cent, Deutsche Bank dropping 6.5 per cent, Societe Generale down 5.3 per cent and Commerzbank shedding seven per cent.

Lloyds ended eight per cent lower after falling about 20 per cent earlier in the session. On Friday, its shares fell more than 30 per cent on the back of a profit warning that revived concerns it could need more state funds or be fully nationalised due to deepening problems at HBOS, which it bought last month.

"There is no clear view on whether you have already reached the bottom," said Luc Van Hecka, chief economist at KBC Securities.

"There is clearly a threat that banks will be under pressure to sell off some of the assets at depressed prices."

New figures showed a deepening economic downturn, which has been hurting demand for metals, cars and other commodities and putting pressure on banks and automobile stocks.

Data showed Japan's economy shrank by 3.3 per cent in the fourth quarter, its worst since the 1974 oil crisis, the German economy contracted by a bigger-than-expected 2.1 per cent in the last quarter of 2008 and the Confederation of British Industry said Britain will fall into a deeper recession than previously thought.

The number of homes sold in recession-bound Spain fell 26 per cent in December from a year earlier, while asking prices for properties in England and Wales were a record 9.1 per cent lower in February than last year.