LONDON, March 3 (Reuters) - Banks led European shares lower by midday on Monday, due to worries over the world economy and potential fallout from the credit crisis, although HSBC (HSBA.L) shares bucked the trend after it reported record pretax profit.
At 1232 GMT, the FTSEurofirst 300 index .FTEU3 was down 1.5 percent at 1,295.54 points, and has shed about 14 percent this year.
British mortgage lender HBOS HBOS.L was the biggest percentage loser, down 5.6 percent while UBS UBSN.VX -- the biggest victim of the credit crisis among major European banks -- lost 3.1 percent.
Billionaire investor Warren Buffett on Monday told CNBC he is no longer offering to guarantee $800 billion of municipal bonds backed by MBIA Inc (MBI.N), Ambac Financial Group Inc ABK.N and FGIC Corp, three large bond insurers.
But Europe's biggest bank, HSBC, gained 1.5 percent after it posted a 10 percent rise in profits to $24.2 billion for last year. This was just below analysts' forecasts and strong gains in Asia helped the bank absorb a $17.2 billion hit for bad debts.
"Their numbers aren't bad. There's no sector read across the banks," said CMC Markets dealer Jimmy Yates. "Expectations (are) that there are other banks with problems or potential writedowns still to come out.
Investors braced for U.S. manufacturing data at 1500 GMT, expected to show factory activity contracted in February.
"All the economic data is still looking very bearish," said Yates, adding this was part of the reason why the index had broken the recent range to the downside.
On Friday, a report said business conditions in the Midwest were the weakest in more than six years while a separate survey showed U.S. consumer sentiment at its lowest since 1992.
This, along with a record loss for AIG (AIG.N), the world's largest insurer, prompted a tumble on Wall Street in the previous trading session.
Goldman Sachs said in a note that European corporate earnings -- within the DJ Stoxx 600 index -- have come in better than expected, but analysts' 2008 earnings estimates have fallen and were likely to be lowered further.
Shares in Scania SCVb.ST surged more than 14 percent at the start of trade before reversing direction to stand down 3.7 percent by 1218 GMT following Volkswagen's (VOWG.DE) purchase of Investor AB's (INVEb.ST) stake in the Swedish truck maker.
Volkswagen, which now has a controlling voting stake in Scania, says it wants to explore cooperation possibilities with MAN (MANG.DE). A combination of MAN and Scania would create Europe's biggest truck maker.
MAN was up 4.2 percent and Volkswagen shed 0.1 percent.
EADS EAD.PA was the biggest percentage gainer, up 9.3 percent, after it won part of a $35 billion U.S. Air Force refuelling deal late on Friday in a surprise blow to Boeing (BA.N).
Around Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI were down by 1.4 to 1.7 percent. (Additional Reporting by Sitaraman Shankar; Editing by David Hulmes)