European shares plunge led by French banks (MarketWatch) (21-01-2008)

LONDON (MarketWatch) -- Stocks in Europe dropped sharply in early trade on Monday morning, as banks in France plunged on rising write-down concerns.

The French CAC-40 index fell 3.5% to 4,976.19, the first time it has fallen below 5,000 since August 2006. Societe Générale shares fell by 5.2%, adding to the losses of more than 8% on Friday, as speculation rose that the firm may be forced to write down assets. Societe Générale declined to comment on Monday.

Shares in Credit Agricole dropped 4.4% and shares in BNP Paribas dropped 4.3%.

Banks were under pressure in the broader region, with shares in Swiss bank UBS dropping by 4.3%, while Credit Suisse shares lost 7.5% and Deutsche Bank shares fell by 3.7%.

Broadly, the pan-European Dow Jones Stoxx 600 index slid 2.1% to 320.65.

The U.K. FTSE 100 index dropped 2.8% to 5,735.70 and the German DAX 30 index moved down 2.8% to 7,111.65.

The downbeat start to the week followed a poor performance from the U.S. on Friday and steep losses for Japanese stocks on Monday.

Losses from financials were to blame in both cases, after U.S. bond insurers came under fire from a ratings agency last week and as a proposed economic stimulus plan from President Bush failed to generate much enthusiasm in a week of U.S. banking sector results.

Worries about the U.S. housing market also meant that U.K. building materials provider Wolseley saw its shares slump 11.3% on Monday. Five-month revenue rose 2%, while trading profit fell by around 25% and adjusted pretax profit dropped by almost a third in the period. The firm expects market conditions to worsen.

Shares in embattled banking group Northern Rock jumped 51.9% to 98 pence after the U.K. Treasury on Monday tentatively backed a plan that would convert mortgages into bonds as a means to provide financing for a takeover bid.

Source: MarketWatch