European shares fall, hit by U.S. bailout snag

The FTSEurofirst 300 index of top European shares was down 2.1 percent at 1,101.70 points, almost reversing gains of 2.2 percent made in the previous session. The index has fallen around 26 percent this year.

"Yesterday, everybody thought (the U.S.) was maybe close to coming to a deal, and so everybody was astonished over the extra differences and points they have to clear," said Heinz-Gerd Sonnenschein, equity strategist at Postbank in Bonn, Germany.
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"You see the nervousness about the overall market and it is a question what will come next and how quick can we get the programme from the U.S."
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Washington Mutual was closed by the U.S. government on Thursday, making it the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan for $1.9 billion.
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Banks were the top-weighted losers on the FTSEurofirst 300, with Lloyds TSB sliding 6.7 percent, and Deutsche Bank down 3.3 percent and Royal Bank of Scotland 3.2 percent lower.
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Dutch-Belgian bank Fortis fell 12.1 percent, having dropped to a 14-year low at one point on Thursday, amid concerns over the group's liquidity, traders said. Fortis Chief Executive Herman Verwilst told a hastily called news conference the bank had no liquidity issue but was looking to sell more non-core activities than anticipated.
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Another top loser was British mortgage lender Bradford & Bingley which slid 10.6 percent as a cost-cutting programme unveiled on Thursday failed to dispel concerns over its funding position.
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B&B shares are down more than 60 percent since the beginning of the month, with the bank's high dependence on expensive wholesale funding raising doubts over its prospects as an independent lender, analysts say.
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Insurers were also weak, with French AXA falling 4.1 percent, Swiss Re down 2.4 percent, Dutch ING losing 4.8 percent and Germany's Allianz 1.5 percent lower.
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WEEKEND DEAL?
U.S. congressional leaders were due to try again on Friday to save the $700 billion Wall Street rescue plan after talks degenerated into chaos on Thursday when a rival Republican plan emerged.

"The ongoing discord is massively unsettling and the fact that we now have Washington Mutual added to the list of casualties is escalating the cynicism," said Martin Slaney, head of derivatives at GFT Global Markets in a note.

"If anything, reports of an alternative plan have added to the uncertainty. Timing is the key issue here; if a deal hasn't been signed and sealed over the weekend, expect massive market turmoil. Monday will be a bloodbath."

The FTSEurofirst 300 hit a three-year low of 1,059.16 in intraday trading on Sept. 18.

Away from financials, shares in mobile phone maker Nokia fell 3.8 percent to 13.4 euros. JPMorgan lowered its 2009 earnings-per-share estimate for Nokia by 11.6 percent and cut its price target for the stock to 10 euros from 11 euros, citing a "worsening market".

Energy shares fell as the crude oil price dropped 2.5 percent to $105.32 a barrel. BP was down 2.1 percent, Royal Dutch Shell dipped 1.8 percent and Total traded 1.8 percent lower.

The basic resources sector index, which includes miners, fell 3.1 percent as copper prices lost ground. Xstrata dropped 4.5 percent, Antofagasta shed 4.7 percent and BHP Billiton traded 3.8 percent lower.