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Tuesday, 09/13/2011 1:45:34 PM

Tuesday, September 13, 2011 1:45:34 PM

Post# of 13
Timely Board. Waiting meeting between Greece, Germany, France representatives tomorrow.
SocGen, ING drag Europe stocks sharply lower
12:20p ET September 12, 2011 (MarketWatch)

MADRID (MarketWatch) -- European stock markets ended lower Monday on increased fears that Greece is headed for default, as French banks led losses on speculation they could be downgraded over their exposure to that troubled euro-zone nation.

"This is an environment in which normal rules don't hold anymore," said Peter Dixon, strategist at Commerzbank. "This is fear, uncertainty and all the other nasty things associated with market panics. You can forget fundamentals, valuations."

The Stoxx Europe 600 index slid 2.5% to close at 218.93. The market closed down 2.6% on Friday, rattled by news that Juergen Stark, a member of the European Central Bank's executive board and governing council, will step down by year's end.

Stark cited "personal reasons," but news reports pointed to discord over the ECB's bond-buying program. The Stoxx 600 lost 3.7% for the week overall.

European-sovereign-debt worries continued afresh on Monday, driving Asia stocks lower, while Wall Street opened lower as well.

The French CAC 40 index , which dropped 4% to close at 2,854.81, bore the brunt of Monday's losses with BNP Paribas SA plunging 12.3%, and Credit Agricole SA and Societe Generale SA each falling more than 10%. Insurer Axa SA slid 9.7%.

Societe Generale released a statement Monday, trying to reassure investors over its exposure to Greek debt. The firm also said it will free up 4 billion euros ($5.4 billion) in capital by 2013 via business asset disposals. Read more on Societe Generale's plans

That came amid weekend media reports citing persons with knowledge of the situation that French banks could be facing a downgrade from Moody's over their exposure to Greek debt.

Chief Executive Frederic Oudea said that a possible downgrade by Moody's "won't change the outlook of the bank." He spoke on a conference call on Monday related to the bank's earlier statement, according to a report by Dow Jones Newswires.

Also in France, one person was killed and three injured at a blast at a French nuclear waste treatment site in the south of the country.

Meanwhile, fears that Greece may not meet the terms of its aid package have been growing and the cost of protecting European bank and government debt against default surged on Monday.

Media reports said German officials have been meeting to figure out how to protect the nation's banks from a potential Greek default.

The German DAX 30 index fell 2.3% to close at 5,072.33, with shares of Deutsche Bank AG sinking 7.3%. COMMERZBANK AG fell 8.3%.

Jitters rattled throughout Europe's banking sector, with Italy's UniCredit SpA down10.9% and Banco Santander SA dropping 4.7% in Madrid. Italy's FTSE MIB index fell 3.9% and the Spain IBEX 35 index declined 3.4%.

"Investors currently value European banks at levels last seen when Lehman Brothers Holdings Inc. collapsed," said Stephen Pope, managing partner at Spotlight Ideas, in emailed comments.

"One cannot overstate the fear that exists over a Greek default and a following debt contagion escalation. An index of European banks has 46 lenders trading at 0.58 times book value; cheapest since the post-Lehman lows of March 2009," he said.

The Athens General Index fell 4.4%, with losses of nearly 8% for National Bank of Greece SA.

Also in banking news, shares of ING dropped 8.6%. The Federal Reserve reportedly scrutinized the proposed acquisition of ING's U.S. online-banking business by Capital One Financial Group .

The Wall Street Journal reported that the Fed sent a two-page letter on Aug. 29 to Capital One asking for details about the "nature and dollar volume" of financial activities in which both financial organizations are involved.

Banks also fell in London as overall European bank sector weakness weighed, though generally losses were less severe. The FTSE 100 index fell 1.6% to settle at 5,129.62.

Weighing on the index, shares of HSBC Holdings PLC sank 2.4%, after dropping to a more than 2-year low in Hong Kong following Friday's surprise resignation of Mark McCombe, the chief executive of the group's Hong Kong unit. The group is also heavily exposed to Europe.

A report on Reuters Monday said HSBC has launched a sale of its non-life insurance business. A spokesman from the investment bank declined to comment.

Shares of Royal Bank of Scotland Group PLC fell 3.4%.

The U.K.'s Independent Commission on Banking said in its final report Monday that the annual pretax cost of banking-sector reforms could be up to 7 billion pounds ($11.1 billion) and it recommended a lengthy deadline for implementation of its proposals. Analysts said the report was mostly well-flagged.Read about the ICB report.

Resource stocks weighed on the London index, as commodities sold off across the board on macroeconomic worries and fears about Europe's sovereign debt crisis.

Among heavy hitters weighing on the index, shares of Royal Dutch Shell Plc sank 1.4% and Rio Tinto PLC fell 1.5%. BHP Billiton PLC dropped 1.4%.
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