MW: European shares extend losses as banks decline
Ericsson shares up after Sony Ericsson narrows loss; miners advance
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares Friday extended steep losses made in the previous session as the threat of profit-hindering regulation continued to drive investors away from the banking sector.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP 251.89, -0.88, -0.35%) declined 0.3% to 252.11, the third straight session of losses for the index.
On Thursday, shares ended with a 1.4% loss, moving further away from 15-month highs hit earlier in the week, after U.S. President Barack Obama stated that he plans to act to restrain U.S. investment banks from proprietary trading and could also limit the size of banks.
"There are earnings at risk and there is a lot of uncertainty about how far-reaching potential reforms turn out to be and what they mean for the structural returns of the large banks," said analysts at UBS.
European banks with investment bank operations were weaker again on Friday, with Deutsche Bank (DE:DBK 44.99, -2.09, -4.44%) (DB 65.60, -3.08, -4.48%) shares down 3.2%, Barclays (UK:BARC 272.30, -10.92, -3.86%) (BCS 18.22, -1.56, -7.89%) shares down 4.4% and Societe Generale (FR:GLE 43.73, -1.04, -2.32%) shares down 1.9%.
UBS (CH:UBSN 14.90, -0.64, -4.12%) (UBS 14.66, -0.56, -3.68%) , down 1.9%, was also downgraded to underperform from neutral at Exane BNP Paribas, which said it believes new rules on capital will be more negative for UBS than first thought.
On a regional level, the U.K. FTSE 100 index (UK:UKX 5,333, -1.86, -0.04%) declined 0.1% to 5,331.79, the German DAX index (DX:DAX 5,729, -18.22, -0.32%) declined 0.3% to 5,729.56 and the French CAC-40 index (FR:PX1 3,852, -9.84, -0.25%) declined 0.4% to 3,848.42.
Asian shares were sharply lower but U.S. stock futures were pointing to some recovery on Wall Street following Thursday's sell-off.
The euro traded up 0.4% at $1.4142 against the dollar, while light sweet crude-oil futures gained 8 cents at $76.16 a barrel and copper futures rose 1 cent to $3.30 per pound.
Miners were higher, with Rio Tinto (UK:RIO 3,309, +21.00, +0.64%) (RTP 212.98, -16.14, -7.04%) shares up 1.5% after an upgrade to overweight from neutral at HBSC. Rival BHP Billiton (UK:BLT 1,949, +6.50, +0.33%) (BHP 74.72, -3.43, -4.39%) rose 1%.
In the oil and gas sector, Tullow Oil (UK:TLW 1,299, +21.00, +1.64%) shares rose 1.7% after it said that its Kasamene-2 appraisal well in Uganda has encountered oil and gas.
Shares of telecom-equipment maker Ericsson (SE:ERICB 70.80, +0.80, +1.14%) (ERIC 9.76, -0.04, -0.41%) climbed 1.7% after its Sony Ericsson mobile-phone-making joint venture with Japan's Sony Corp. said its fourth-quarter net loss narrowed to 167 million euros ($236 million) from 187 million euros in the year-earlier quarter.
Due to tight cost controls and the roll-out of new products, the company's gross margin improved to 23% from 15% from a year earlier and 16% in the third quarter, the vendor said.
