European shares fall on US economy fears, record high oil

Europe's main stock markets dropped on Friday after Wall Street fell heavily overnight on renewed fears of a recession in the United States, while record high oil prices also hit sentiment, dealers said.

In afternoon trading, London's FTSE 100 index of top companies was down by 0.82 percent in value to stand at 5,916.90 points.

Frankfurt's DAX 30 slid 1.41 per cent to 6,765.59 points and the Paris CAC 40 shed 1.33 per cent to 4,800.33.

The DJ Euro Stoxx 50 index of leading eurozone shares lost 1.57 per cent to 3,725.01 points.

The European single currency stood at $1.5179, after striking a record high 1.5239 earlier on Friday.

US share markets suffered heavy losses Thursday as a government report reaffirmed the economy slowed markedly in the fourth quarter, dealers said.

Japanese share prices slumped by more than two percent on Friday as losses on Wall Street, a stronger yen and soaring oil prices spooked investors.

The price of New York crude reached an historic high of $ 103.05 per barrel on Friday, lifted by the weakness of the dollar.

In London the FTSE 100 was being dragged down by heavyweight financials. "The FTSE is having a bad day on the back of the banks," said Commerzbank strategist Peter Dixon.

"There are still issues concerning subprime write-offs as well as the ongoing slowdown in the UK economy," he added.

Barclays bank shed 3.35 percent to 483.75 pence and Royal Bank of Scotland lost 3.05 per cent to 389.75 pence. However in Paris, troubled bank Societe Generale led the CAC 40, jumping 1.42 percent to 71.3 euros amid ongoing speculation of a takeover bid from domestic rival BNP Paribas, dealers said.

US broker Lehman Brothers also upgraded Societe Generale's stock to 'overweight' from 'underweight'.

Overnight on Wall Street, the benchmark Dow Jones Industrial Average closed down 0.88 percent at 12,582.18 points.

The Nasdaq composite lost 0.94 percent to 2,331.57 points and the Standard and Poor's 500 index finished down 0.89 percent at 1,367.68.

Stocks weakened after the government said the US economy expanded at a tepid 0.6 per cent annualized crawl during the last three months of 2007, leaving its initial growth estimate unchanged.

A separate snapshot showed new claims for unemployment benefits rose by 19,000 to 373,000 in the week ended February 23, suggesting weaker conditions are buffeting the job market.