Banks and miners fuel slide in European shares

LONDON (Reuters) – European shares fell early on Wednesday as the growing fear of U.S. recession hit banks, while a trading update from Rio Tinto weighed on mining stocks.

By 0816 GMT the FTSEurofirst 300 index of top European shares was down 1.24% at 1,378.11 points, its lowest since September 2006.

The index lost 2.6% on Tuesday after U.S. investment bank Citigroup posted a record $10 bln quarterly loss, cut its dividend and said it would receive a capital injection of $14.5 bln. A surprise fall in retail sales added to the view the U.S. economy may be heading for recession.

“It looks like markets are now realising that the credit crisis in the United States is far away from being over and there are further risks arising that are further down the chain,” said Heino Ruland, a strategist at FrankfurtFinanz in Frankfurt.

HSBC was once again the biggest negative weight on the index, falling 2.5%, while Rio Tinto shares fell 1.9%.

Tech stocks came under pressure after earnings from Intel missed forecasts and the company issued a dour outlook, while in Europe, ASML — which supplies most of the world’s top chip makers — fell 7% after reporting a recovery in quarterly unit orders but order value fell unexpectedly.

Shares in Germany‘s Infineon fell nearly 5.5%.

Around Europe, London‘s FTSE 100 index fell 1%, while Frankfurt’s DAX dropped 0.7% and Paris‘ CAC 40 lost 0.9%.