European stocks see biggest weekly fall since 2008

Bigger-than-expected rise in US payrolls helps to limit losses; European shares lose about $820 billion of their valuation.

Stock exchange figures 311 (photo credit: REUTERS/Kacper Pempel)
Stock exchange figures 311
(photo credit: REUTERS/Kacper Pempel)
LONDON - European shares fell on Friday and posted their biggest weekly decline in nearly three years on worries about weak global growth and fears that the euro zone debt crisis could engulf Italy and Spain.
A bigger-than-expected rise in US payrolls helped to limit losses.
Investors flee economic gloom, policy paralysis
The FTSEurofirst 300 index of top European shares fell 1.8 percent to 975.02 points, the lowest close in 13 months. Volume was more than twice the average of the last 90 days.
Over the week, the index fell 9.8 percent, the biggest weekly fall since October 2008.
European shares measured by the MSCI Europe index lost about $820 billion of their valuation this week.
"People are as much worried about the way things are being handled as anything else. The authorities don't seem to have a strategy for Italy and Spain. They're just buying (bonds) in Ireland and Portugal," said Colin McLean, managing director at SVM Asset Management in Edinburgh.
Royal Bank of Scotland, majority-owned by the state, illustrated the toll the euro zone crisis is taking on the sector. Its shares fell 6.9 percent on Friday after it reported a pretax loss of $1.1 billion in the second quarter, bruised by writedowns on Greek government bonds and Irish customers struggling to repay loans.
Lloyds Banking Group, which reported a loss on Thursday, fell 6.1 percent. RBS and Lloyds fell 21 and 24 percent respectively over the week.
However, resource stocks were the biggest fallers, on the demand outlook following recent weak economic data. The STOXX Europe 600 Oil & Gas Index fell 3.3 percent. Royal Dutch fell 3.9 percent, taking its loss for the week to 13.9 percent, hit by issues in Nigeria.
US job growth accelerated more than expected in July as private employers stepped up hiring, easing fears the economy was sliding into a fresh recession.
This helped the index turn positive briefly, recovering from a low early in the session.
"There were big selling programs - it looks as though hedge funds were liquidating," McLean said about early trading in the market. "There was an unwillingness to quote sensible prices in some stocks."
However, the index went back towards the lows, with the employment figures not enough to convince investors that growth was picking up, following recent weak US data on GDP, manufacturing and consumer spending.
"The non-farm payrolls were good. It feels like the market is not moving on real information and investors are taking a risk-adverse mentality on the uncertainty the politicians have been creating," said Jane Coffey, who manages 340 million pounds in assets for Royal London Asset Management.
Across Europe, Britain's FTSE 100 and Germany's DAX fell 2.7 and 2.8 percent respectively. France's CAC40 fell 1.3 percent.