European shares slide

European shares ended at their lowest close in a week on Monday, after Greece fuelled concern about a possible default when saying it will miss deficit targets for this year. Banks were among the worst hit stocks, on worries they may have to make further writedowns on Greek debt holdings. The STOXX Europe 600 Banking Index fell 2.8 percent.
Belgian-French bank Dexia fell 10 percent in heavy volumes as its capital position looked increasingly stretched by its exposure to Greece, raising pressure on state shareholders to consider a second bailout. Credit agency Moody's announced it was reviewing the group for possible downgrade.
The FTSEurofirst 300 index of top European shares fell 1.2 percent to 912.26 points, the lowest close since September 26. Volume was 75 percent of the index's 90-day average. The index lost 17 percent in the third quarter, its biggest quarterly fall since 2008. Some analysts say while a default by Greece is inevitable, the worst news may now be factored into share prices.
"It is a question of when, not if (Greece defaults)," said Andy Lynch, fund manager at Schroders, which manages 197 billion pounds ($305 billion). "But we probably should see some form of recovery for shares between now and year-end, in that a lot of the negatives are well known."
Greece will remain trapped in recession next year, threatening its effort to cut deficits and claw its way out of a debt crisis shaking the eurozone, budget figures showed. The cost of insuring German debt against default hit a record high on Monday on growing worries the eurozone's largest economy will face a hefty bill for a deepening regional crisis.
The pan-European index was down more than 2 percent at one point on Monday, before paring losses after upbeat US economic data. US factory activity expanded at a faster pace than expected in September after production and hiring increased, suggesting the manufacturing sector should help keep the economy out of recession.
"The (US) numbers were less bad than feared," Lynch said. "But we need to see some more evidence that the US economy is continuing to grow rather than put too much weight on this data." Other data continued to suggest a slowdown. Factory activity in Europe and Asia slumped in September to levels not seen since the depths of the financial crisis as export demand dropped, surveys showed.
Car sales in Spain fell to their lowest September total in 15 years and also dipped in France, leading analysts to say a gloomy economic outlook in Europe meant worse could be expected in the coming months. The auto sector fell 3.7 percent, with German heavyweight BMW down 5.7 percent.
Across Europe, Germany's DAX fell 2.3 percent; Britain's FTSE 100 fell 1.0 percent, and France's CAC40 fell 1.9 percent. The pan-European index is up nearly 7 percent from a 26-month low hit in September, but some technical analysts were bearish. "The most likely scenario at this stage is that the index will soon be re-testing its lows, in the area between 853 and 875, since there is little technical evidence to suggest that a break higher is likely any time soon," said Bill McNamara, technical analyst at Charles Stanley.
Sandy Jadeja, chief technical Analyst, City Index, said: "Given that there has been no significant improvement on the bullish side, stock indices still appear to have a bearish bias unless strong momentum reversals take place soon. Although we are still trading within a channel we note that lower highs are suggesting weakness is still apparent. Among other individual stocks, telecoms gear maker Alcatel-Lucent fell 12 percent in volume nearly double its 30-day average, after Nomura cut its price target, citing the economic backdrop.