European shares fell in early trade on Monday with banks weighing on sentiment amid fears over more writedowns and failures and airlines struck by a profit warning at Ryanair.
By 0814 GMT, the FTSEurofirst 300 index of top European shares was down 0.5% at 1,163.30 points.
Banks were again the heaviest negative weight after U.S. regulators seized two more financial institutions and sold them to Mutual of Omaha Bank, making them the sixth and seventh casualties of the credit crunch.
"I expect there will be more of the little ones going down," said Mic Mills, a risk trader at TradIndex. "There is more hidden stuff which is slowly coming out but whether it is enough to hit another big bank remains to be seen."
The DJStoxx European banks index fell 1.3%, with UBS down 2.5% and Deutsche Bank, which is due to report on Thursday following results from Deutsche Postbank on Wednesday, down 1.7%.
HBOS fell 5% following weekend reports that the bank is due to report more writedowns when it publishes results on Thursday.
The week is a crucial one for bank earnings, with Santander due on Tuesday and UniCredit on Friday.
Deutsche Postbank fell 2.5% after the weekly Focus magazine said Deutsche Bank was inclined to abandon its bid for Postbank after studying its books.
A bearish note from Citigroup, which cut its stance on the European banking sector to "underweight" from "neutral" also weighed.
"Write-downs, earnings downgrades, dividend cuts and capital raising are becoming the norm," the broker said in a note.
And a statement from Standard & Poor's on Friday that it may cut some ratings on Fannie Mae and Freddie Mac further darkened sentiment in the sector.
Around Europe, Britain's FTSE was flat, Germany's DAX was down 0.8% and France's CAC fell 0.6%.
PROFIT WARNINGS AND WEAK DATA CONTINUE
Budget carrier Ryanair was a major loser with a 22% slump after posting a sharp decline in quarterly net profit and warning on full-year earnings.
Easyjet dived 10%, British Airways fell 5.7%, Air France-KLM lost 2.8% and Lufthansa fell 4.1%.
In the Netherlands, Dutch mail company TNT lost 8% after its second-quarter earnings fell short of expectations. The group reiterated its 2008 outlook at the lower end of the range of forecasts.
Concerns about company earnings lingered following shock warnings from Munich Re, Daimler and Rentokil last week.
The forward-looking GfK German consumer sentiment fell to the lowest level in five years amid growing concerns about inflation and the turmoil in financial markets.
"Growth is likely to have moderated in Q2 and will almost certainly slow further in the second half of the year as the two engines of growth – Germany and the manufacturing sector – are both starting to show signs of weakness," said Elin Ottosson, a strategist at Cazenove in a note.
Miners rose as metal prices firmed. Rio Tinto, BHP Billiton and Xstrata all gained between 1.5-2.8%.
And Unilever lifted food producers after the world's third-largest consumer goods group said it has agreed to sell its North American laundry business for $1.45 billion.
British publishing group Pearson climbed 2.3% after issuing a confident outlook after a 38% increase in first-half operating profit.
