UBS drags European stocks down in thin trade

By Peter Starck

FRANKFURT (Reuters) - Fears of more asset writedowns at Swiss bank UBS weighed on Europe's stock markets on Monday, leaving Switzerland's benchmark SMI index in the red, while German and French stocks eked out minor gains.

Volumes were thin due to holidays in the United States and Britain.

"It's very, very slow. Nothing exciting today," a Frankfurt-based trader said.

The FTSEurofirst 300 index of top European shares ended 0.2 percent lower at 1,319.55 points, having fallen 3.2 percent last week.

UBS lost 5.8 percent to hit its lowest close since March 31 after saying in the prospectus for its upcoming $15-billion rights issue that it may suffer additional losses from its exposure to U.S. residential mortgages.

"The shares are really in the headwind: the whole subprime issue, the capital hike ... This could become very expensive for the bank," one trader said.

UBS, Europe's largest subprime casualty so far with $37 billion (18.7 billion pounds) in U.S. subprime-related asset writedowns, will trade ex-rights on Tuesday and some traders saw that as another factor behind Monday's slide in the stock.

Zurich's SMI fell 1.3 percent, pulled down also by a 1.8 percent drop in the shares of UBS rival Credit Suisse, while Frankfurt's DAX and Paris's CAC 40 edged up 0.1 percent each.