Europe shares fall; Barclays, HSBC lead banks lower

At 1122 GMT, the FTSEurofirst 300 index of leading European companies was down 0.9 percent at 895.82 points after gaining 0.7 percent in the previous session. The index is down nearly 16 percent in October, on course for its worst month on record.

Barclays slumped 9.1 percent after the British bank said it is raising $12.1 billion from investors from Qatar, Abu Dhabi and elsewhere to allow it to avoid taking UK government rescue cash, while HSBC sank 7.3 percent after Goldman Sachs downgraded the stock to "sell" from "neutral".

"The road ahead still looks long and steep. A relatively deep global recession could require further capital raising, with banks on this occasion going into a downturn in relatively poor shape," said Keith Bowman, equity analyst at Hargreaves Lansdown in London.

"For now, market consensus opinion denotes a weak hold."

Japan's Nikkei average closed 5 percent lower despite the Bank of Japan trimming its key interest rate to 0.3 percent from a decade-high 0.5 percent.

BT DIVES
The telecoms sector was another standout loser, led by Britain's BT, which plunged 24 percent after the company said it would miss earnings forecasts for its second quarter due to a poor performance at its Global Services unit.

Within the sector, Cable & Wireless slipped 2.8 percent and France Telecom lost 2.6 percent.

Weaker crude prices hurt the oil and gas sector, with Total easing 0.9 percent and Royal Dutch Shell dipping 0.6 percent.
Auto shares were once again propped up by Volkswagen, which bucked the downward trend, adding 7.6 percent.

Renault, however, fell 5 percent, making it the biggest loser in the European autos sector, after its 44 percent subsidiary Nissan Motor Co said it was undecided on its dividend payout after a near 48 percent fall in first-half operating profit.

Drugmakers were in demand for their defensive quality, with GlaxoSmithKline adding 2.9 percent, Roche up 3.7 percent and Novartis putting on 1.1 percent.

Also on the upside, German chemicals group BASF advanced 4.9 percent.

The FTSEurofirst 300 has fallen more than 40 percent in 2008, battered by the global credit crisis and the resulting economic slowdown. Across Europe, Britain's FTSE 100 dropped 1.8 percent, France's CAC-40 lost 1.9 percent and Germany's DAX was down 0.2 percent.

Investors will keep an eye on a slew of U.S. economic data later in the day, including the Reuters/University of Michigan consumer sentiment survey, a key gauge of consumer inflation and the Chicago PMI survey which tracks Midwest business activity.