Europe Stocks Close Up; Banks Fall, Oils Gain

The pan-European FTSEurofirst 300 index of top shares was 0.6 percent higher at 796.5 points after peaking at 811.45 earlier in the day.

European stocks closed higher on Friday, although well off earlier highs as British banks slid after Lloyds Banking Group posted a big loss at its HBOS unit.

The pan-European FTSEurofirst 300 index of top shares was 0.6 percent higher at 796.5 points after peaking at 811.45 earlier in the day.

"The Lloyds statement has led to further devastation across the banking sector. Activity and volumes are very thin today. There is an air of quietness and it only takes one shock to send it down," said Howard Wheeldon, strategist at BGC Partners.

Lloyds slumped 32.4 percent after it said its HBOS subsidiary lost about 8.5 billion pounds ($12.28 billion) last year, while its Lloyds TSB unit made a profit of about 1.3 billion pounds. Lloyds said HBOS had been hit by a bigger-than-expected 7 billion pounds of impairments in its corporate division.

"The market doesn't like the fact that in a period of a month the corporate losses (at HBOS) are twice what they had announced," said Mamoun Tazi, analyst at MF Global.

Barclays, Societe Generale, Royal Bank of Scotland and Standard Chartered fell between 3.1 percent and 9.2 percent.

Life insurers were also in the doldrums. Aviva, Aegon and Prudential were down 2.2 percent to 6.3 percent.

Investors were initially heartened by news on Thursday that the Obama administration was creating a plan to subsidise mortgage payments for troubled homeowners, a possible new front in the fight to beat the credit crisis.

Across Europe, the FTSE 100 index was down 0.3 percent, Germany's DAX was up 0.1 percent and France's CAC 40 was 1.1 percent higher.

OILS GAIN

Energy stocks were the top risers on the index. French energy group Total gained 1.5 percent and Royal Dutch Shell rose 2.2 percent as crude gained 5.8 percent to trade at just under $36 a barrel.

Metro rose 3.9 percent after it sold its fashion store unit Adler to private equity fund BluO.

Pernod Richard was 6 percent higher after it confirmed guidance of double-digit growth in group net profit from recurring operations, which should exceed euros 1 billion for the first time over its 2008/2009 financial year.

In macroeconomic news, U.S. consumer confidence fell to its lowest in three months in February as sentiment grew increasingly gloomy over an economic downturn that most expected to last five more years, a survey showed.

The Reuters/University of Michigan Survey of Consumers said its index reading of confidence for February tumbled to 56.2 from 61.2 in January.

"The index was disappointing, reversing all the gains of the past two months. Sentiment is back to where it was in November. Notable in the details was an extraordinary drop in the 12-month outlook which dropped from 47 to 27," said Cary Leahey, economist, Decision Economics, New York.

Meanwhile, finance ministers and central bankers from the G7 industrial powers are meeting in Rome this weekend for a series of meetings that will show whether governments worldwide can respond effectively to the worst financial and economic crisis since World War Two.