European stocks end lower; fears of losses hit banks

European stocks closed lower yesterday, led by banks after Lehman Brothers forecast a big quarterly loss and announced a capital increase, and as talk swirled of further losses at Swiss bank UBS.

The FTSEurofirst 300 index of top European shares closed 0.34 per cent lower at 1,279.62 points.

Banks were pummelled by results from Lehman that fell far short of expectations, and by a 3.3 per cent fall in UBS after a media report suggested the lender may post more losses in the second quarter.

British banks were particularly weak, with Royal Bank of Scotland falling 4.8 per cent after it sold shares not subscribed for in its record rights issue for a discounted 230 pence a piece.

Barclays fell 5.7 per cent and HBOS slumped 7.2 per cent. Substantial target price downgrades at Goldman Sachs and Societe Generale also weighed on HBOS shares.

Analysts said they would be staying away from banks for now.