GLOBAL MARKETS: European Stocks Slump; Banks, Greece Worries Weigh

-- Stocks led lower by banks
-- Moody's downgrades, delay to Greece's second bailout weigh
-- Societe Generale, AXA shares drop after earnings


LONDON (Dow Jones)--European stocks slumped 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 0845 GMT, the benchmark Stoxx Europe 600 index was down 0.9% at 261.84. Regionally, London's FTSE 100 and Paris's CAC-40 were also down 0.9%, at 5841.00 and 3360.88, respectively, while Frankfurt's DAX was 1.3% lower at 6671.30.

Bank shares took a hammering, with the Stoxx Europe 600 index for the sector down 2.2% 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.

Fourth-quarter earnings from Societe Generale added to the sector's woes Thursday. SocGen shares fell 3.6% after the company 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. Commenting on the loss on mortgage-backed securities, Espirito Santo Investment Bank said: "This will be taken negatively as management has consistently tried to assure the market that an independent BlackRock valuation of the assets in the portfolio had implied a fair value higher than the current book value."

Sticking with financials, shares of French insurer AXA weren't faring too well either. The stock dropped 3.2% 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.

Meanwhile, worries about Greece continued to plague the market. 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. In order 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.

"The official statement sounds encouraging that there will be a decision. However, it will not be an easy meeting," said ING. "There seems to be a high level of irritation and mistrust from an increasing number of euro-zone countries vis-a-vis the Greek. It looks as if more austerity measures alone will not do the deal."

It cannot be excluded that the euro zone will find a way to bridge Greece's March funding problems without agreeing on a second bailout package, said ING. "Maybe it is a bit too sceptical but even Monday's meeting might not yet bring the all-encompassing Greek package."

As far as economic data are concerned, the euro-zone calendar is looking pretty bare, so all eyes will be on the U.S., where initial jobless claims and housing starts are due at 1330 GMT and the Philadelphia Fed index is at 1500 GMT.

In Asia, stock markets also fell earlier Thursday. Japan's Nikkei Stock Average was off 0.1% in choppy trade, Australia's S&P/ASX 200 dropped 1.6%, South Korea's Kospi Composite fell 1.4%, Hong Kong's Hang Seng Index slipped 0.4%, and China's Shanghai Composite Index fell 0.2%.

In foreign exchange markets, the euro remained under pressure against dollar, weighed by worries about Greece and Moody's downgrades. At 0845 GMT, the single currency was fetching $1.2997, from $1.3068 late Wednesday in New York. The dollar was at Y78.72, from Y78.43.

Among commodities, spot gold was at $1,716.90 a troy ounce, down $11.90 from its New York settlement Wednesday. March Nymex crude oil futures were down 65 cents at $101.15 and Brent oil futures were down 30 cents at $118.63. The March bund contract was down 23 ticks at 139.32.