Market nerves drag down European shares
European stocks fell sharply on Thursday as investors reacted nervously to the debt crisis in eurozone member Greece and weak demand for a share offering by US banking giant Citigroup.
London--Bank shares were also hard hit after leading central bankers and national regulators said they were aiming to introduce proposals to strengthen international financial requirements on lenders by the end of 2012.
London's benchmark FTSE 100 index sank 1.93 percent to close at 5,217.61 points, the CAC 40 in Paris dropped 1.16 percent to 3,830.82 points and the Frankfurt DAX fell 1.00 percent to 5,844.44 points.
Elsewhere in Europe, Brussels was down 1.46 percent, Milan 0.93 percent and Zurich 0.61 percent. The DJ Euro Stoxx 50 index of top eurozone shares shed 1.02 percent to 2,896.60 points.
On Wall Street, the Dow Jones Industrial Average was down 0.95 percent and the tech-heavy Nasdaq index fell 1.00 percent in afternoon trading.
Markets became turbulent when ratings agency Standard & Poor's on Wednesday downgraded Greece's credit rating to the lowest level in the eurozone as the government struggled to contain a ballooning public deficit.
"An S&P downgrade of Greece's sovereign debt and Citigroup's struggle to raise capital are two developments contributing to the market's angst," said Patrick O'Hare of US financial market research company Briefing.com.
Analysts at Daiwa Securities SMBC investment bank said: "Greece's second credit rating downgrade in two weeks fuelled concerns about the Greek government's ability to achieve a sustainable reduction in the debt burden."
Markets also digested Wednesday's action by the US Federal Reserve, which extended its record-low interest rates and said this policy would remain in place "for an extended period" to support a still-precarious economic recovery.
Banking shares, which had risen sharply on Wednesday, headed south.
Lloyds Banking Group dropped 8.06 percent to 51.1 pence, Barclays lost 6.22 percent at 273.85 pence and HSBC fell 3.51 percent to 684.1 pence.
French bank Credit Agricole, which owns the struggling Greek lender Emporiki, lost 4.59 percent to close at EUR 12.90. Shares in Germany's biggest lender, Deutsche Bank, fell 2.30 percent to EUR 51.00.
Banks were under pressure after the Basel Committee on Banking Supervision, an influential group of central bankers and regulators, unveiled plans for banking sector reform aimed at preventing another financial crisis.
"The capital and liquidity proposals will result in more resilient banks and a sounder banking and financial system," said Dutch central bank chief Nout Wellink, chairman of the Basel Committee.
The committee said reforms would be introduced "in a manner that raises the resilience of the banking sector over the longer term, while avoiding negative effects on bank lending activity that could impair the economic recovery."
Investors in London were also looking at official data showing retail sales in recession-hit Britain fell unexpectedly in November for the first time in six months, dropping by 0.3 percent compared with October.
Earlier on Thursday, the Tokyo Stock Exchange's benchmark Nikkei-225 index declined 0.13 percent to close at 10,163.80 points.
Hong Kong fell 1.22 percent and Seoul was 0.99 percent lower as analysts said the rising dollar was encouraging repatriation of funds to the US.