European stocks lower as financials weigh

European equity markets fell on Monday as weakness in financial and mining stocks offset strength in drugmakers.

The FTSE Eurofirst 300 closed down 0.8 per cent to 1,291.96, Frankfurt's Xetra Dax shed 0.4 per cent to 6,743.54, the CAC 40 in Paris lost 0.6 per cent to 4,682.70 and London's FTSE 100 was 1.3 per cent lower to 5,707.7.

Shares in IKB, the German bank hit hard by the subprime crisis, plunged by 21.8 per cent to EU4.94 after reports emerged over the weekend that it was looking for $2bn to stay afloat. Reports that the huge capital guarantee was needed to compensate for further subprime-related writedowns spurred analysts at UniCredit and Equinet to downgrade the stock.

Deutsche Postbank bucked the weak financial sector to rise 1 per cent to EU59.62 after the German press reported the retail bank could be sold as early as the spring.

Postbank has been the subject of fierce speculation during the past months and has strongly outperformed the European banking sector - down just 0.7 per cent since the start of the year, against the sector's 16 per cent losses.

Deutsche Post, the mail and logistics group, owns 50 per cent of Postbank and has said it may decide on a sale in the second half of the year. Its shares were down 0.6 per cent to EU21.67.

Commerzbank, one of the German banks which has already voiced interest in acquiring Postbank, fell 0.8 per cent to EU19.07.

Société Générale, the French bank, led the remainder of the sector lower after launching a one-for-four share issue to existing shareholders at EU47.50 - a 39 per cent discount to Friday's closing price.

The company announced the rights issue after revealing nearly EU5bn losses due to last month's rogue trading scandal. The shares fell 4 per cent to EU74.59, also hit by fading hopes that French bank BNP Paribas would make a bid for Société Générale.

Drugs stocks rallied after last weeks losses, related to a profit warning from Britian's GlaxoSmithKline. Denmark's Novo Nordisk rose 2.7 per cent to DKr326.

French electricity companies LeGrand and Schneider Electric fell after UBS cut its ratings for the shares from "neutral" to "sell". LeGrand was 5.7 per cent lower at EU18.38 and Schneider fell 2.3 per cent to EU69.64 after UBS said they were heavily exposed to a downturn in construction and industrial markets.