European shares fell on Thursday as concern about the likelihood of yet more losses among financials dented banking stocks, while uncertainty about global economic growth weighed on the broader market. In the energy sector, BP lost 1.2 per cent, while total fell 1.4 per cent and Royal Dutch Shell shed 2.2 per cent.
US inventory data on Wednesday showed a surprise rise in gasoline stocks, suggesting consumer demand is starting to decline. Crude futures were up at $136.50 a barrel. Banks Banco Santander, UBS and Royal Bank of Scotland were among the biggest individual drags on the broader European market, as investor worries over the chances of more writedowns or further capital raising persisted.
At 0904 GMT the FTSEurofirst 300 index was 1.2 per cent down at 1,167.57 points. It has lost almost 23 per cent this year. "The old problems are still the new ones. People said that with the rescue of Bear Stearns (in mid-March), this was the beginning of the end.
What rubbish! We see now that we are only at the end of the beginning. This is to be continued," Lang & Schwarz analyst Giuseppe-Guido Amato said. Belgian-Dutch financial services group Fortis shed as much as 2 per cent after the board said it would meet on Friday to discuss problems with angry investors.
A Belgian newspaper said Chief Executive Jean-Paul Votron will step down. Adding to existing fears among investors of a deterioration in consumer spending - the lifeblood of many major economies - was a series of pessimistic updates from a number of big retailers.
French supermarket Carrefour fell over 8 per cent, hitting its lowest in five years after the company, the world's second largest retailer, posted second-quarter sales that showed clear signs of a slowdown in consumer spending.
Shares in Associated British Foods, the owner of discount fashion chain Primark, fell nearly 4 per cent after it posted a 24 per cent rise in group third-quarter sales, but a slowing in underlying growth at Primark.
Boe Decision Time Investors will be watching the Bank of England, which is widely expected to hold interest rates at 5 percent at 1100 GMT, as it juggles a slowing economy with high inflation. Around Europe, Austrian brickmaker Wienerberger dropped some 19 per cent after issuing a profit warning due to a collapse in residential construction in Britain and a contraction in the United States.
Other construction-related stocks declined after a Credit Suisse note suggested Saint-Gobain, Italcementi and Holcim were at risk of issuing profit warnings. Shares in the three fell 1.3-3.6 per cent. "Recent economic news flow reinforces our view that the credit crisis will have a lasting effect on the banking sector's profitability, including France," Credit Suisse said in a note on French banks.
It cut its target prices for Credit Agricole Societe Generale and BNP Paribas by between 20 and 40 per cent. Aerospace group EADS, the parent of Airbus, fell as much as 4.6 per cent after the US airforce reopened an aerial tankers tender which had initially picked Northrop Grumman and EADS over Boeing.
Germany's DAX fell 0.8 per cent, France's CAC index dropped 1.5 percent and Britain's FTSE 100 shed 1.2 per cent. In economic data, French industrial output fell by more than expected in May.
"The manufacturing outlook in France is deteriorating sharply, and risks remain clearly skewed to the downside," Morgan Stanley said in a note. "The strength of the euro, high input prices, and the tightening of credit conditions are taking their toll on the French economy.
This is also the case in the other euro area countries," Morgan Stanley said. Other stocks on the move included French engineer Alstom, down more than 5 per cent after Morgan Stanley started coverage of the stock with an "underweight" rating.
