By Ana Nicolaci da Costa
LONDON, March 13 (Reuters) - European shares fell sharply on
Thursday as soaring oil prices threatened to bite into company
profits, while banks fell as investors returned to earth after a
two-day orbit fuelled by central bank liquidity injections.
Europe's third-biggest bank UniCredit <CRDI.MI> fell 5
percent after posting slightly lower-than-expected 2007 profits.
It said its exposure to U.S. subprime was a "negligible" 164
million euros in December.
Banks were the biggest weight on the index, with UBS
<UBSN.VX> down 4.7 percent, Barclays <BARC.L> falling 3.6
percent, and Commerzbank <CBKG.DE> down 5.3 percent.
At 0942 GMT the FTSEurofirst 300 index <> was down 1.8
percent at 1,261.13, having rallied for two days running after a
coordinated central bank move on Tuesday to add billions of
dollars of liquidity to struggling credit markets.
"There was something behind the rally, but I am not
surprised it's going off again, showing the lack of faith in the
markets at the moment," said Jimmy Yates, a dealer at CMC
Markets.
"Despite these things that are being done, the outlook is
still not very good going forward ... so I'm not surprised to
see people locking in profit on the back of that."
Data showing the U.S. economy is on the brink of recession
put additional pressure on financials, which are grappling with
billions of dollars of writedowns related to a crisis in the
U.S. subprime mortgage market.
Setting the tone, U.S. stocks fell overnight, and Japan
followed suit as a new record on oil prices, above $110 a
barrel, raised fears of further strains on corporate profits.
Kazakhmys <KAZ.L> also fell 3.9 percent after the copper
producer said it had received no takeover proposal from rival
Eurasian Natural Resources <ENRC.L>, which said the previous day
it might be interested in buying Kazakhmys.
Rio Tinto <RIO.L> fell 2.7 percent, and BHP Billiton <BLT.L>
lost 3.3 percent, as growth worries also hurt miners.
CONTINENTAL
German auto parts supplier Continental <CONG.DE> fell 6
percent on news that problems at the powertrain business it
bought as part of the Siemens VDO deal were larger than first
thought.
British building products retailer Wolseley <WOS.L> fell 5.9
percent after Goldman Sachs downgraded the stock to "sell" from
"neutral" and cut its price target.
The strength of the oil price also put pressure on airlines,
with Ryanair <RYA.I>, British Airways <BAY.L> and Air France-KLM
<AIRF.PA> down between 3.9 percent and 6.2 percent.
Despite the strength of the oil price, crude came off its
highs, so energy stocks BP <BP.L>, Royal Dutch Shell <RDSa.L>
and Total <TOTF.PA> were down between 1.1 and 1.8 percent.
Telecom Italia <TLIT.MI> rose 5.9 percent to be top gainer
in Europe, even as sources said Royal Bank of Scotland had sold
nearly all of a 3.7 percent stake in Telecom Italia that had
served as collateral for a loan to Italian holding company Hopa.
The stock suffered a hard fall earlier this week following
the presentation of its latest industrial plan.
RBS declined comment.
Nestle <NESN.VX> rose 3.8 percent after the world's largest
food company surprised investors by raising its growth outlook,
saying the year had started strongly and it expected a similar
growth rate to last year in 2008.
Elsewhere, Unilever <ULVR.L> gained 1.1 percent, and Danone
<DANO.PA> gained 0.4 percent.
(Editing by Will Waterman)
