London: European shares closed lower on Wednesday, falling for the sixth consecutive session, with financials hammered as heavyweight HSBC slid on worries it will need to raise money to shore up its balance sheet.

The FTSEurofirst 300 index of top European shares fell 4.3 percent to 804.17 points, its lowest close in three weeks.

HSBC closed 8 percent lower after Morgan Stanley analysts said the bank is likely to halve its dividend and may need to raise up to $30 billion in a rights issue.

"It's a combination of many things coming at once," said Gareth Williams, European equity strategist at ING. "There's the banking sector, US retail sales, the bankruptcy at Nortel. Arguably, all this should be in the price, but coming together it's raising concerns about the scale of the bad news in the quarter."

The pan-European index fell more than 44 percent in 2008, battered by a credit crisis that helped to tip several major economies into recession.

There was more evidence on Wednesday of economic weakness. The German economy contracted sharply in the final quarter of 2008, and euro zone industrial output plunged in November, boosting expectations the European Central Bank will make a deep cut to interest rates on Thursday.

Williams said the focus was now more on fourth-quarter results than on the ECB decision.

Crude prices CLc1 slipped 3 percent, as U.S. stockpiles rose. This hurt oil majors such as BP, which closed 5.2 percent lower.

European shares, already deep in the red, fell further after news that U.S. retail sales fell 2.7 percent in December. Data for October and November was also revised downwards.

Source : Reuters