Europe shares slide for third day

European shares fell for a third day yesterday as another swathe of shockingly weak US data deepened fears of recession, hitting the banking sector, while insurer Swiss Re rallied after its results.

Banks were the largest drag on the broader European market, with Barclays falling 4.7 per cent, BNP Paribas losing three per cent and Swiss bank UBS, the biggest victim of the credit crisis among major European banks, down 3.7 per cent.

A drop in US consumer confidence to a 16-year low, along with a contraction in business activity in the auto-intensive US Midwest region added to investors' conviction the US economy is heading for recession.

The FTSEurofirst 300 index of top European shares fell 1.4 per cent to 1,315.28, bringing losses for February to more than one per cent and marking the fourth consecutive monthly decline.

"This is confirmation that things are slowing down really," Mark Bon, a fund manager at Canada Life who manages a portfolio of continental European stocks, said of the US data.

"Unfortunately at the moment, the earnings are not deflecting people's attention away from the big macro issues in the States, so those are still taking centre stage."

Shares on Wall Street were down by nearly 1.8 per cent after the data and after American International Group Inc, posted the worst loss in its history, which suggested problems in the credit markets are far from over.

The FTSEurofirst 300 has lost about 10 per cent so far this year as data from the United States has become increasingly bleak, clouding the outlook for European corporates. Shares in Swiss Re, the world's largest reinsurer, were the top positive weight on the broader European market, rallying 5.2 per cent after it posted a smaller-than-expected nine per cent drop in 2007 net profit and booked only modest further subprime write-downs.

"We've seen banks rally strongly off the lows that they reached earlier this month. The reporting season generally has perhaps not produced as many negatives as people had feared, particularly in the UK banks," said Darren Winder, head of macro and strategy research at Cazenove.

Germany's Allianz was one of the worst drags on Germany's DAX index, falling 3.2 per cent, while Italy's Assicurazioni Generali, Europe's number-three insurer, dropped 1.8 per cent.

"We're still digesting the general picture we've been left with from the reporting season and unfortunately that's not really addressing any deeper questions or issues that investors have," Winder said.

Warnings from Federal Reserve Chairman Ben Bernanke on Thursday that the troubled housing sector may lead to small-bank failures knocked stock markets globally.

Around Europe, Germany's DAX fell 1.7 per cent, France's CAC 40 was down 1.5 per cent and Britain's FTSE 100 index dropped 1.4 per cent.

On the upside, Belgian brewer InBev powered to its highest in over three months, rising 3.4 per cent after Thursday's strong 2007 results and dividend.

Other gainers included Vodafone, which edged up 0.8 per cent after a broker upgrade, while shares in British insurer Resolution rose 3.1 per cent after rival Pearl confirmed its previous commitment to the £4.9 billion deal to take over the company. A string of delays had prompted speculation the deal could be derailed.