Europe shares slip on Morgan Stanley; pharma down

European shares fell more than 1 percent in afternoon trade on Wednesday, with financial stocks losing ground after Morgan Stanley posted a net loss, and Roche putting pressure on pharmaceutical stocks.

At 1305 GMT, the FTSEurofirst index of top European shares was down 1.2 percent at 778.50 points after falling as low as 777.18 points. The benchmark is down 6.5 percent so far this year after falling 45 percent in 2008.

Banks were among the biggest losers on the index, with HSBC down 0.7 percent, BNP Paribas falling 2.7 percent, Societe Generale slipping 3.1 percent and Credit Agricole down more than 2 percent.

The sector came under pressure after Morgan Stanley posted its second straight quarterly loss and slashed its dividend as real estate investment losses and a charge from the improving value of it own debt wiped out gains in its trading businesses.

"In the past week, U.S. banks have reported at opposite ends of the spectrum and while we have had the good and the bad, we now have the ugly," said Manoj Ladwa, senior trader at ETX Capital in a note.

"Morgan Stanley does not seem to be performing so well. With revenues down across all areas of the business and earnings for the first quarter a lot lower than analysts expected, investors are likely to question whether Morgan Stanley will fall by the wayside like many others," he said in a note,

Pharma shares fell, led lower by Roche as a cancer drug Avastin — a key Genentech asset now wholly owned by Roche — failed in a major study to prevent the recurrence of colon cancer in patients who have undergone surgery.

Roche shares were down 8.9 percent, while AstraZeneca declined 1.4 percent and Shire was down 1.5 percent. GlaxoSmithKline fell 2 percent also hit by first-quarter results which fell short of expectations.

Britain's FTSE 100 index was down 0.7, with the market digesting UK's budget proposals that hit insurance stocks in particular. Aviva, Friends Provident, Prudential fell 3.1-4.9 percent.

Germany's DAX was down 0.6 percent and France's CAC 40 slipped 1 percent.