Banks push European shares down 1.5 pct

Tue Aug 19, 2008 9:01am BST

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LONDON (Reuters) - European shares extended an early decline on Tuesday as a sell-off in banking stocks worsened after fresh concern about the impact of the credit crunch on the financial sector hit global equities.

By 8:50 a.m., the FTSEurofirst 300 index of top European shares was down 1.5 percent, or 18.46 points, at 1,170.69 points.

Banks accounted for a net negative contribution of 5.2 points to the index, compared with a net negative contribution of 3.8 points at 8:13 a.m.

Royal Bank of Scotland lost 4 percent, HSBC fell 1.5 percent and Banco Santander and BNP Paribas shed 2.5 to 3.6 percent.

A media report on Monday that suggested the U.S. government may have no choice but to effectively nationalise mortgage finance groups Freddie Mac and Fannie Mae, reignited concern in the investment community that the worst of the mortgage crisis was far from over and sent stocks reeling.

(Reporting by Amanda Cooper)

Credit headwind

News headlines speak of recovery, but financing is still a big problem in Germany. The dearth of credit to tide firms over is frustrating policymakers, who are blaming reluctant banks and there is little agreement on how best to increase lending flows. Full Article