European shares slip; recession fears

European shares slipped in early trade today, with recession fears resurfacing after impressive gains in the last two sessions on coordinated measures by governments to revive the struggling banking sector.

At 9.18 a.m. (Malta time), the FTSEurofirst 300 index was down 1.4 percent at 952.72 points. It rose by a record 10 percent on Monday and by 3 percent yesterday.

Today, banks were the top weighted losers, with Standard Chartered falling 3.5 percent, Societe Generale shedding 1.9 percent, HSBC down 2.7 percent and BNP Paribas dropping 2 percent.

"After the colossal gains achieved at the start of this week, it would seem that the hangover has kicked in and investors have sobered to the reality that recession is here," said Andrew Turnbull, senior sales manager at ODL Securities.

Recession fears returned to centre stage after trillions of dollars pledged for bank bailouts from Europe to Asia helped allay fears of an imminent financial meltdown.

Southeast Asian nations backed by Japan, South Korea, China and the World Bank were the latest to join the global rescue effort, agreeing to create a multi-billion fund to buy bad debt and help banks.

The initiative came a day after Washington unveiled a plan to spend up to $250 billion on equity stakes in US banks. The plan followed big bank bailouts announced in London, Paris, Berlin and other capitals that could bring major banks under government control.

But concerns remained that the rescue would come at a huge economic cost and do little to repair the damage already done by a 14-month credit crunch, which has slowed the economy, potentially hurting demand for commodities.

Oil ticked lower to trade around $78.50 a barrel, a far cry from all-time highs of around $147 hit earlier this year. BP, Royal Dutch Shell, gas producer BG Group and Tullow Oil shed between 0.7 and 3.1 percent.

Global miner Rio Tinto fell 4.3 percent. It warned of slowing Chinese demand for commodities because of the world financial crisis and signalled a possible delay in plans to sell $10 billion in assets.

Indian mining company Sterlite Industries, a unit of Vedanta Resources, has said it will not be able to close a $2.6 billion deal to buy U.S. copper miner Asarco LLC out of bankruptcy, due to troubles in the credit markets, an Asarco attorney said on Tuesday.

Vedanta shares were down 4.6 percent.

The FTSEurofirst 300 index plummeted 22 percent last week -- its worst weekly performance ever, and is down nearly 37 percent so far this year.