By Daniela Silberstein
Feb. 27 (Bloomberg) -- European stocks and U.S. index futures retreated, led by banks as the U.S. government ratcheted up its effort to save Citigroup Inc. and data showed the American economy shrank more than economists anticipated last quarter.
Citigroup slumped 33 percent in New York after the government agreed to a third rescue attempt that will cut existing shareholders’ stake in the company by 74 percent. Lloyds Banking Group Plc tumbled 28 percent in London after failing to announce an agreement on a U.K. government asset insurance program, while Royal Bank of Scotland Group Plc fell 17 percent.
Europe’s Dow Jones Stoxx 600 Index slid for the fifth time in six days, decreasing 3.4 percent to 170.14 at 1:39 p.m. in London. The regional gauge lost 11 percent this month, the sixth straight decline, as companies from Anglo American Plc to Cie. de Saint-Gobain SA posted disappointing results and the economic crisis in eastern Europe deepened.
“The economy and the solidity of companies is the main concern,” said Peter Braendle, who oversees $50 billion at Swisscanto Asset Management in Zurich. “Sentiment is very pessimistic.”
Futures on the Standard & Poor’s 500 Index slid 2.8 percent. Gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to revised figures from the Commerce Department today in Washington. percent. The shares fell as much as 48 percent.
Citigroup
Citigroup fell 33 percent to $1.66. The Treasury Department agreed to convert as much as $25 billion of preferred shares into common stock as long as private holders agree to the same terms, the government said in a statement today. The U.S. doesn’t immediately intend to inject additional money after channeling $45 billion to the New York-based company last year.
Lloyds slipped 28 percent to 54.1 pence. The lender’s full- year net income dropped 75 percent to 819 million pounds ($1.2 billion). Lloyds’ HBOS unit posted a 7.5 billion-pound loss for 2008 after bad loans at the bank’s corporate lending arm increased.
Lloyds rose 31 percent yesterday after Royal Bank of Scotland said it would put 325 billion pounds of investments into the asset protection program and shift an additional 540 billion pounds of assets into a so-called bad bank. The government is trying to shield banks from further losses to boost lending and spur economic growth.
Talks with the U.K. Treasury are “progressing and well advanced,” Lloyds said in a statement today. The Treasury said it won’t make an announcement today.
RBS slid 17 percent to 24.1 pence, after surging 26 percent yesterday. Barclays Plc slumped 10 percent to 101.2 pence.
Europe’s Stoxx 600 has tumbled 53 percent since the start of last year as credit-related losses at financial firms worldwide climbed to $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II.
Eastern Europe
The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank will provide up to 24.5 billion euros ($31 billion) to help central and east European banks and businesses cope with the financial crisis.
“We have a special responsibility for the region and because it makes economic sense,” EBRD President Thomas Mirow said in a joint statement issued by the international organizations today in London. “For many years, the growing integration of Europe has been a source of prosperity and mutual benefit and we must not allow this process to be reversed.”
Hungarian Prime Minister Ferenc Gyurcsany said in an interview yesterday that he wants the European Union to arrange a package of as much as 180 billion euros to help east European economies, banks and companies weather the financial crisis.
Hungary’s Budapest Stock Exchange Index lost 1.9 percent today. Poland’s WIG20 Index slid 1.5 percent.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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