Bear Stearns fire sale sparks Europe share plunge

Bear Stearns fire sale sparks Europe share plunge

Mon Mar 17, 2008 5:35am EDT, YAHOO

By Sitaraman Shankar

LONDON, March 17 (Reuters) - European shares tumbled by more than 3 percent early on Monday as a distress sale of Bear Stearns (BSC.N: Quote, Profile, Research) pushed rattled investors to dump financials, fearing contagion across the banking system.

The euro hit a new high against the dollar and crude continued to surge to new records, compounding the woes of companies in the region.

At 0920 GMT, the FTSEurofirst 300 was down 3.2 percent at 1,215.32, tracking big losses in the United States and Asia after JP Morgan (JPM.N: Quote, Profile, Research) unveiled a takeover of stricken rival Bear Stearns at a rock-bottom price.

Banks led losers, with UBS (UBSN.VX: Quote, Profile, Research), Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and Barclays (BARC.L: Quote, Profile, Research) all falling more than 8 percent. HBOS (HBOS.L: Quote, Profile, Research) and Alliance & Leicester (ALLL.L: Quote, Profile, Research) slid more than 11 percent.

"There's turmoil in all markets after Bear Stearns, and equities is not the place to be," said BNP Paribas strategist Edmund Shing.

"Everyone's asking: Who's next? Is there a Bear Stearns in Europe, could investment banks start to fail?"

"It's clear that Bear was by far the most exposed to mortgage-backed securities relative to their size and were also hit by failure of their internal hedge funds," he said, but added there was uncertainty about the extent of European bank losses.

Investors were also on edge ahead of earnings reports later in the week from top U.S. investment banks. Continued...