GLOBAL MARKETS: European Stocks In The Red; Greece Is The Focus

-- Stocks led lower by banks
-- Moody's downgrades, delay to Greece's second bailout weigh
-- But French and Spanish debt auctions solid
-- Societe Generale, AXA shares drop after earnings; Renault shares up


LONDON (Dow Jones)--European stocks fell Thursday, led lower by banks, as investors faced another delay in securing Greece's second bailout and the prospect of further downgrades for the region's banks weighed on sentiment.

At 1155 GMT, the benchmark Stoxx Europe 600 index was down 0.7% at 262.40, London's FTSE 100 was down 0.7% at 5850.38, Paris's CAC-40 was down 0.6% at 3371.81 and Frankfurt's DAX was 1.1% lower at 6687.48.

Greece was still very much the focus. Despite assurances from Jean-Claude Juncker, head of the Eurogroup of euro-zone finance ministers, after Wednesday's conference call that there had been "substantial further progress" in negotiations between Greece and its troika of international lenders, market participants remained skeptical.

Indeed, since the cancellation of Wednesday's meeting of euro-zone finance ministers, which has been put back to Monday, headlines about Greece have done little to inspire investor confidence. Euro-zone officials are considering a delay to all or part of Greece's second bailout package until after the country's general election, which is expected to take place in April. To avoid a default, however, a bridging loan is being considered, which would allow Greece to meet is EUR14.4 billion repayments by March 20.

Rhetoric between Greek and European Union officials only added to the confused, tense atmosphere. After German Finance Minister Wolfgang Schaeuble expressed doubt Wednesday over whether the next Greek government would stay committed to the austerity measures, the Greek Finance Minister Evangelos Venizelos said Europe's wealthier countries are playing with fire by toying with the idea of pushing Greece out of the euro zone.

Banks suffered the brunt of the selling, after Moody's Investors Service placed various ratings of 114 financial institutions in 16 European countries on review for possible downgrade, pointing to banks' vulnerability to the euro-zone sovereign debt crisis. Among those affected were Barclays, BNP Paribas, Commerzbank, Credit Agricole, Deutsche Bank, HSBC, ING Group, Royal Bank of Scotland, Santander, Societe Generale and UniCredit.

It wasn't all bad though, as Societe Generale managed to reverse earlier losses to trade up, even though its fourth-quarter earnings failed to meet expectations. SocGen said net profit for the quarter tumbled 89% to EUR100 million, against expectations of a drop to EUR261 million. The bank said it took further write-downs on its Greek sovereign bonds and booked major losses on U.S. mortgage-backed securities. Espirito Santo Investment Bank said the legacy asset valuations were a big concern. On the positive side, though, it said de-leveraging is occurring quicker than expected. At 1125 GMT, Societe Generale was up 0.9%, while the Stoxx Europe 600 banks index was down 1.1%, off earlier lows.

Elsewhere, Renault added 3% after its 2011 earnings pleased investors. Net profit attributable to shareholders was down 39% at EUR2.09 billion, broadly in line with expectations, but the company's cash flow beat estimates.

French insurer AXA didn't fare as well. The stock fell 2.4% after its full-year results. AXA posted a 57% jump in net profit to EUR4.32 billion, but this was from a relatively low base and came in below analysts' expectations of EUR5.60 billion.

There was some good news in the bond market, following solid French and Spanish debt auctions. The Spanish treasury sold more bonds than planned, while France's total amount sold was just a touch below its target. Newedge said the Spanish auction saw "good demand as paper looked attractive," while demand for French bonds was "very good."

In Asia, stock markets also fell earlier Thursday. The Australian S&P/ASX 200 index dropped 1.7%, South Korea's Kospi fell 1.4%, and Hong Kong's Hang Seng Index lost 0.4%. The Shanghai Composite Index 0.4% and Japan's Nikkei Stock Average slipped 0.2%.

In foreign exchange markets, the euro recovered some losses but was still under pressure against the dollar and by 1125 GMT, was fetching $1.3003, from $1.3068 late Wednesday in New York. The dollar was at Y78.79, from Y78.43.

Among commodities, spot gold was at $1,718.90 a troy ounce, down $9.90 from its New York settlement Wednesday. March Nymex crude oil futures were down 40 cents at $101.34 and Brent April oil futures were up six cents at $118.99. The March bund contract was down 25 ticks at 139.34.

U.S. stock index futures pointed to a weaker open, with the DJIA front month futures contract down 0.2% at 12,737.00 and the S&P 500 front month futures contract down 0.3% at 1338.00. Initial jobless claims and housing starts are due at 1330 GMT, while the Philadelphia Fed index is at 1500 GMT.