European stocks, dollar fall on profit-taking, bank action

By Herbert Lash

NEW YORK (Reuters) - U.S. and European stocks fell and oil slid on Monday as investors locked in profits after a strong run-up in riskier assets and major U.S. banks announced large stock offerings to repay government bailouts.

U.S. Treasuries and euro zone government debt rose as the outlook for stocks weakened, while the Federal Reserve bought $3.51 billion of longer-dated bonds and the Bank of England bought 3.4 billion pounds ($5.16 billion) of long-dated gilts.

Oil retreated to under $58 a barrel, pressured by weaker equity markets, a firmer dollar and profit-taking, all helping drive crude's price from six-month highs reached last Friday.

The dollar rose, rebounding from a four-month low, as investors booked profits from recent gains. But interbank rates in London continued to fall as the overall outlook in the financial sector eases.

With government stress tests on big U.S. banks out of the way, investors sold banking shares to take gains on both sides of the Atlantic.

U.S. Bancorp (USB.N: Quote, Profile, Research), Capital One (COF.N: Quote, Profile, Research) and BB&T Corp (BBT.N: Quote, Profile, Research) became the latest banks to seek additional capital by announcing stock offerings. Investors sold bank stocks to book profits ahead of the dilutive effects of the offerings.

U.S. Bancorp lost 5.8 percent, Capital One fell 11 percent and BB&T Corp shed 5.4 percent.

"Banks are going to need to raise capital, that's weighing on the market. We climbed a wall of worry, bought the rumor, and now we're selling the news," said Marc Pado, market strategist at Cantor Fitzgerald in San Francisco.