European stocks slide on oil

European shares fell as much as two per cent yesterday to end at their lowest in two weeks as oil hit a record high above $76 a barrel amid escalating violence in the Middle East and stoked worries about corporate earnings.

SAP fell six per cent after the software company pre-announced second-quarter results and missed analysts' estimates for licence sales, operating earnings and total sales. Business Objects and Atos both lost two per cent.

The pan-European FTSEurofirst 300 index closed 1.4 per cent weaker at 1,293.6, its lowest close since June 28 and down eight per cent from a near five-year high struck in May.

The index suffered its biggest one-day loss in a month. "Macro events are still a big focus but earnings news flow is bound to dominate sentiment from next week and early indications are bad," said one trader at a French brokerage.

Both the Dow Jones industrial average and the Nasdaq lost 0.7 per cent. Germany's 30-share DAX index shed two per cent, France's CAC 40 fell 1.8 per cent and Britain's FTSE 100 declined 1.6 per cent.

"As long as the oil price is increasing, it will harm profits. In our opinion, we will see a good second quarter with good profits, but the outlook is the big question mark," said Philipp Musil, fund manager at Constantia Privatbank.

The Bank of Japan's interest rate decision takes centre stage today with the central bank widely expected to hike rates for the first time in six years. US crude oil prices hit a record high on renewed worries over supply from major exporter Nigeria and as conflict between Israel and Lebanon heightened international tensions.

Oil shares still ended mixed, with BP up 0.2 per cent and Total down one per cent.

The prospect of higher fuel costs hit shares in airlines and travel companies, with cruise operator Carnival down 3.6 per cent, while among airlines, Air France fell 3.7 per cent and British Airways dropped two per cent.

UK's biggest insurer Aviva fell 3.2 per cent as it agreed to pay $2.9 billion in cash for US life insurer AmerUs and said it would pay for the deal in part with a share issue, raising about £900 million.