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Europe shares fall in midmorning trade

  European stocks fell in midmorning trade on Friday, snapping a three-day rally, as HSBC and Barclays led banks lower, while BT Group dived after warning it would miss earnings forecasts.


At 11:22 a.m., the FTSEurofirst 300 index of leading European companies was down 0.9% at 895.82 points after gaining 0.7% in the previous session. The index is down nearly 16% in October, on course for its worst month on record.

Barclays slumped 9.1% after the British bank said it is raising $12.1 billion from investors from Qatar, Abu Dhabi and elsewhere to allow it to avoid taking government rescue cash, while HSBC sank 7.3% after Goldman Sachs downgraded the stock to ‘sell’ from ‘neutral.’ “The road ahead still looks long and steep. A relatively deep global recession could require further capital raising, with banks on this occasion going into a downturn in relatively poor shape,” said Keith Bowman, equity analyst at Hargreaves Lansdown in London. “For now, market consensus opinion denotes a weak hold.”


The telecoms sector was another standout loser, led by BT, which plunged 24% after the company said it would miss earnings forecasts for its Q2 due to a poor performance at its Global Services unit. Within the sector, Cable & Wireless slipped 2.8% and France Telecom lost 2.6%. Weaker crude prices hurt the oil and gas sector, with Total easing 0.9% and Royal Dutch Shell dipping 0.6%.

Auto shares were once again propped up by Volkswagen, which bucked the downward trend, adding 7.6%. Renault, however, fell 5%, making it the biggest loser in the European autos sector, after its 44% subsidiary Nissan said it was undecided on its dividend payout after a near 48% fall in first-half operating profit. Drugmakers were in demand for their defensive quality, with GlaxoSmithKline adding 2.9%, Roche up 3.7% and Novartis putting on 1.1%. Also on the upside, German chemicals group BASF advanced 4.9%.

The FTSEurofirst 300 has fallen more than 40% in 2008, battered by the global credit crisis and the resulting economic slowdown. Across Europe, the FTSE 100 dropped 1.8%, France’s CAC-40 lost 1.9% and Germany’s DAX was down 0.2%. Investors will keep an eye on a slew of US economic data later in the day, including the Reuters/University of Michigan consumer sentiment survey, a key gauge of consumer inflation and the Chicago PMI survey which tracks Midwest business activity. (Reuters)