European stocks closed lower on Monday as investors opted to take profits on recent gains after another series of bad US bank results highlighted damage caused by the US sub-prime home loan crisis.

Dealers said record high oil prices added fresh concerns over inflation.

Meanwhile, a £50-billion ($99-billion) Bank of England plan to get British banks lending again proved welcome on the view that the authorities had finally taken concrete action.

This helped London stocks close off their lows.

It also highlighted just how serious the fallout from the US sub-prime home loan crisis has become, with British bank-lending drying up fast for new mortgages.

News that Bank of America's first quarter earnings had been savaged added to the overall negative tone, which contrasted sharply with Asia where investors chased stocks in the belief that the worst of the crisis was over.

Asian stock markets posted robust gains on Monday as investors there read last week's first quarter US results — especially from Citigroup — in a positive light, convinced that much of the sub-prime losses were now out in the open.

Accordingly, Tokyo closed up 1.63 percent, Hong Kong added 2.17 percent and Sydney put on 3.1 percent.

Dealers said there was room for some profit taking given recent gains and the bad news may only provided the appropriate lead, leaving underlying sentiment still more positive.

In London, the FTSE 100 index of leading shares was little changed, slipping just 0.06 percent to 6053.00 points, but in Frankfurt the Dax 30 shed 0.83 percent to 6786.55 points and in Paris the Cac 40 lost 1.03 percent at 4910.35 points

The Euro Stoxx 50 index of leading European shares was down 1.02 percent at 3769.89 points.

The European single currency stood at 1.5885 dollars, up from 1.5871 dollars earlier in the day and 1.5814 dollars in New York on Friday.

On Wall Street, the Dow Jones Industrial Average was down 0.44 percent at around 4.15pm GMT but dealers there said the market was ripe for a pullback after gains of more than four percent in the past week.

As Bank of America announced a 77 percent fall in earnings, Al Goldman at Wachovia Securities noted that the banking giant "badly missed first quarter expectations, but did not cut its dividend".

Goldman said he expected "some normal profit taking after last week's big advance" but was nonetheless optimistic.

"The message of the market since the Bear Stearns debacle a month ago, and the subsequent further writedowns, losses and capital infusions by the big banks and brokers is that increasingly investors feel the worst is behind us and they have begun to look to better times ahead," he said.

In London on Monday, the Bank of England attempted to soothe the effects of the global credit crunch with its plan to get Britain's slowing home loan market working again.

"The Bank of England liquidity package is obviously going to help the market"

"The Bank of England liquidity package is obviously going to help the market," said Jim Wood-Smith, head of research at Williams de Broe.

"But, banking stocks have turned lower on talk that (British finance minister) Alistair Darling will force all banks to undergo a rights issue.

"Investors are selling short in anticipation of the banks raising money," added Wood-Smith.

Britain's second-largest bank, the Royal Bank of Scotland, confirmed on Monday it would ask shareholders for fresh cash following reports that its capital reserves had been depleted by the credit crunch and its ABN Amro takeover.

RBS shed 2.99 percent to 372.50 pence while Barclays lost 3.53 percent to 478.50 pence, HBOS was down 3.23 percent to 540 pence and Lloyds TSB fell 2.37 percent to 442.50 pence.

Oil companies got a boost from record oil prices with Shell up 1.28 percent to 1905 pence.

In Frankfurt, Commerzbank lost 1.95 percent to 22.73 euros and Deutsche Bank was down 1.15 percent at 76.50 euros.

In Paris, dealers said the market was especially hit by concerns over record high oil prices while the latest US corporate results on Monday did not match those of last week, especially at Bank of America.

Among the oil companies, Total added 0.91 percent at 51.66 euros and EDF was up 2.70 percent at 62.39 euros.

Carrefour fell 1.94 percent at 44.94 euros on news of fresh protests in China against France over Tibet.

Elsewhere in Europe, Belgium's Bel-20 index lost 1.01 percent to 3890.09 points, Madrid's Ibex-35 was down 1.41 percent to 13 728.90 points, the Mib-30 in Italy fell 0.55 percent to 34,202 points, Amsterdam's AEX shed 0.86 percent to 470.67 points and Switzerland's SMI lost 0.31 percent to 7394.94 points.

AFP