European shares close lower as banks weigh

European shares closed lower yesterday as concerns about further losses at major banks persisted and grim data renewed worries about the economic outlook.

The FTSEurofirst 300 index of top European shares closed down 0.8 per cent at 828.53 points, as initial enthusiasm over the Federal Reserve's interest rate cut faded.

The FTSEurofirst 300 has fallen more than 45 per cent in 2008, hurt by a credit crisis that has led several major economies sliding into recession.

Banks took the most points off the index, with BNP sliding 17.2 per cent after its investment banking unit suffered an 11-month loss, hit by rocky capital markets and exposure to an alleged $50 billion fraud by US financier Bernard Madoff.

Deutsche Bank fell 8.8 per cent amid market talk of a possible fourth-quarter loss on investment writedowns. The bank declined to comment.

The DJ Stoxx European banking sector index, the worst performing sectoral index this year, lost four per cent. HSBC, Société Générale and Natixis were down between 5.8-11.9 per cent.

"Weaker company data are back in focus," said Heinz-Gerd Sonnenschein, equity strategist at Postbank in Bonn, Germany.