European stocks slump on finance sector worries

European stock markets slumped on Monday, giving up initial gains, as focus switched to the banking sector following recent poor earnings and persistent worries over China's economy, analysts said.

After a quiet session across Asia owing to the Chinese New Year, Europe opened higher but indices were down more than 2.0 percent in London and more than 3 percent in Paris and Frankfurt in afternoon trading, with the DAX falling below 9,000 points for the first time since October 2014.

Madrid was down 3.3 percent and the main index in Athens was down more than 7 percent.

Focus turned to the banking sector after the spotlight having been firmly on commodity stocks in recent weeks owing to slumping oil and metals prices.

The rout deepened after oil prices resumed their slide.

Global shares had already tumbled on Friday after US jobs data sparked worries that the Federal Reserve could decide to raise rates again as soon as March.

Concerns linger also over weak growth in the eurozone and emerging-market economies.

"European markets, after initially opening higher, have been led sharply lower by banking shares, a number of which are hitting multi-year lows," said Michael Hewson, chief market analyst at traders CMC Markets UK.

"The disappointing (recent) earnings across the sector from the big US firms to Credit Suisse and Deutsche Bank in Europe alongside the ugly spectre of negative interest rates have seen investors significantly reassess the chance of an earnings turnaround after years of regulatory fines for past misdeeds."

Among the biggest losers Monday were HSBC, whose shares were down 3.5 percent. Commerzbank slumped 5.7 percent and BNP Paribas gave up 4.5 percent.

Meanwhile in Athens, the FTSEB index of financial stocks was down over 20 percent in midday trading.

In addition to the general concerns about the banking sector in the eurozone, investors were worried about another dispute between the government and its EU-IMF creditors like one last year which wiped out the value of bank capital.

In foreign exchange meanwhile, the dollar gave up gains won thanks to an increased chance of another US rate rise this year.

Friday's latest monthly jobs report showed that US hiring eased in January but that the unemployment rate slipped to 4.9 percent and wage growth increased modestly.

Markets were said to be reacting also to weekend news that China?s foreign exchange reserves had fallen to their lowest level in more than three years, as Beijing sells dollars to stop the yuan from depreciating further.

The world?s largest currency hoard shrank by $99.5 billion in January to some $3.2 trillion, the People?s Bank of China said on its website, the lowest since May 2012.

Worries about China's economy, the world's second biggest, have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.

- Key figures around 1300 GMT -

London - FTSE 100: DOWN 2.2 percent at 5,722.44 points

Frankfurt - DAX 30: DOWN 3.1 percent at 8,996.33

Paris - CAC 40: DOWN 3.1 percent at 4,071.13

EURO STOXX 50: DOWN 2.7 percent at 2,801.23

Tokyo - Nikkei 225: UP 1.1 percent at 17,004.30 (close)

New York - Dow: DOWN 1.3 percent at 16,204.97 (close)

Euro/dollar: DOWN at $1.1122 from $1.1158 on Friday

Dollar/yen: DOWN at 116.27 yen from 116.86 yen