European stocks fall as utilities, resources drag

European stocks sank yesterday, notching up their biggest one-day fall since October, as investors rushed to bank profits after weaker data and earnings worries sparked a sell-off on Wall Street.

Utilities ranked as the largest losing sector after their recent rally on merger speculation, while oil producers and miners weighed on the market alongside telecoms stocks after Vodafone was hit by downbeat broker notes.

"The problem technically and psychologically is that we went ahead of ourselves; people have been chasing hot groups and hot stocks," said Philippe Gijsels, senior equity strategist at Fortis Bank.

"People start to take profits, and the economic figures maybe are used as an excuse today. You had a very over-extended market."

The pan-European FTSEurofirst index of 300 shares closed down 1.4 per cent at 1,344.49 points, its lowest in over a week, after striking a 4-1/2-year high of 1,363.8 on Monday.

On Wall Street, stocks fell sharply after the latest batch of US consumer confidence and business growth data spooked investors, alongside earnings worries after Google cautioned overall search growth was slowing.

"Following an almost universally upbeat message from the January newsflow, US February data has taken a notable turn for the worse," economist Rob Carnell at ING said. Among major losers, French power giant EDF fell 5.4 per cent as investors speculated it may come under increased competition if Suez and Gaz de France push through their proposed merger.

"Right now, Suez and Gaz de France are trying to come together, and if they do they will create a pretty strong competitor to EDF," said a trader.

Shares in Suez fell 3.3 per cent as traders said terms of a merger between Gaz de France and Suez were not favourable to Suez shareholders. The slide helped pull the DJ Stoxx Utility index down 2.2 per cent.

Oil stocks dropped, with BP down 2.3 per cent and Total 1.8 per cent lower as oil analysts forecast another increase in US crude inventories. NYMEX crude traded flat at $61 a barrel.

Mining stocks slid, with Rio Tinto down three per cent and Antofagasta trading 2.1 per cent lower as the sector tracked losses in Australia.

Vodafone fell 4.2 per cent as brokers lowered their price target on the mobile phone giant, while news and information provider Reuters slipped 4.5 per cent after Credit Suisse cut its recommendation to "neutral".

On the upside, Royal Bank of Scotland rallied 2.7 per cent after posting a profit jump and saying it would buy back shares, while British American Tobacco gained 2.3 per cent after upbeat results.