European Stocks Down on Banks and Oil Price Gains (MarketWatch) (11-02-2008)

LONDON (MarketWatch) - European shares opened 1 percent down on Monday morning but were off lows around mid-morning, as concerns grew due to rising oil prices as well as banks as Societe Générale said that it intends to raise $8 billion via a discounted share offer and as write-down fears mounted.

Declines in the banking sector were led by Societe Générale, which was losing 3% after it said that said it's launching a 5.5 billion euro capital increase at 47.50 Euros a share, a 39% discount to Friday's close. The bank, which is reeling from a trading scandal that cost it $7.1 billion, also said Monday that it expects to earn 947 million Euros in 2007, down 82%.

Also, shares in troubled German bank IKB Deutsche Industriebank lost another 16.1% after media reports over the weekend that the mortgage bank needs up to 2 billion Euros in fresh capital to stay afloat.

Other banks under pressure included Barclays, down 1.9%, and HSBC Holdings, down 2.1%. A report over the weekend suggested that HSBC could be looking at selling 400 of is French branches.

The German DAX 30 index lost 0.7% to trade at 6,718.20, the French CAC-40 index slid 0.8% to 4,670.58 and the U.K. FTSE 100 index moved down 0.5% to 5,754.80.

European Central Bank governing council member Axel Weber said over the weekend that there are reasons for concern on recent inflation expectations, and the central bank will monitor the situation very closely and act in an appropriate fashion.

U.S. stocks on Friday skidded to weekly losses as the price of oil and other commodities soared, sparking concern about inflation and an already slowing economy. 

Oil prices held onto recent gains, recently up 3 cents at $91.80.

Companies that are sensitive to higher oil prices include car maker Daimler, down 0.8%, and airline Air France-KLM, down 0.7%.

Still, oil producers were getting a bit of a lift, with BP shares up 1.1% and Royal Dutch Shell up 1%.

Source: MarketWatch