European shares ended yesterday at their lowest level in almost three weeks as Infineon's wider-than-expected operating loss added to earnings worries and a rise in oil prices revived inflation fears, offsetting strong energy stocks.
Europe's biggest chipmaker, Infineon, announced a first-quarter operating loss more than twice as large as analysts' expected, sending its shares tumbling 4.6 per cent and adding to a string of negative news in the technology sector.
"It's a catastrophe, it looks like their (Infineon's) memory business went up in smoke during the quarter," a London-based analyst said. "This is a company that is struggling to defend itself as it lacks economy of scale."
The FTSEurofirst 300 index ended unofficially 0.6 per cent lower at 1,284.66, its worst close since January 2. The narrower DJ Euro Stoxx 50 was 1.1 per cent weaker at 3,555.40.
Sentiment was already gloomy after the world's second biggest mobile phone maker Motorola disappointed investors with its sales and outlook, sending Finnish rival and sector leader Nokia down two per cent.
Motorola's update as well as lower-than-expected numbers from Citigroup and General Electric's disappointing sales weighed heavily on Wall Street, sending the Dow Jones industrial average and the technology-laced Nasdaq Composite Index down more than one per cent each.
LVMH shares shed 2.5 per cent after the French luxury goods group said it was too early to give a detailed forecast for the new year, with broker downgrades adding to LVMH's woes.
Investors are increasingly nervous after a set of patchy results as the earnings season gets under way on both sides of the Atlantic. However, some remained optimistic that European shares could still gain due to a robust performance in heavily-weighted energy shares.
"Profits in the oil sector will once again top what we had in the previous year, and given the sector's important weight in indices we are rather confident," said Jean-Louis Autant, head of diversified investment at Groupama Asset Management.
"Results might be slightly less positive elsewhere, but these sectors don't weigh as much as oil does," he said, adding he expected markets to rise five per cent in the first quarter and then plateau.
Anxiety over supplies from oil producing countries Iran and Nigeria drove crude prices more than one dollar higher to $68 a barrel, helping push energy stocks such as Norway's Norsk Hydro and Statoil to new record highs.
Oil prices have gained 21.5 per cent since their five-month low of $55.40 hit in mid-November, rekindling inflation and earnings worries.
Other European standout movers included UK drugmaker Shire, whose stock shot up six per cent after settling a legal dispute with rival drugmaker Impax Laboratories, which was seeking to make a cheap version of its top-selling medicine.