Write-down jitters, high oil drag European stocks lower

European stocks fell 2.2 per cent yesterday, ending at their lowest close since October 2005 as fears of asset write-downs returned to haunt the banking sector, while strong oil prices continued to stoke inflation concerns.

Banks took yet another beating, with UBS hitting 10-year lows, down 5.3 per cent, while Deutsche Bank lost 4.4 per cent as talk swirled that more hefty write-downs stemming from the credit crisis could further hit second-quarter earnings within the banking sector.

France Telecom bucked the trend, featuring among the very few stocks on the upside as several brokerages upgraded their rating on the stock after the company dropped its takeover offer on Nordic telecoms operator TeliaSonera.

The FTSEurofirst 300 index of top European shares closed 2.2 per cent lower at 1,175.55 points. The index, which has fallen in seven of the last 10 sessions, has tumbled about 22 percent so far in 2008.

"The impact from the US subprime market debacle is far from over, especially for retail banks and insurers, while investment banks have already unveiled big writedowns," said Romain Boscher, head of equity management at Groupama Asset Management, in Paris.

"But it might be time to come back on some industrials, and we remain confident on commodity-related stocks as the slowdown in growth has already been priced in," he said.

Oil prices remained above $142 a barrel yesterday, fuelling concerns over input costs for companies and over consumer spending.

Auto stocks tumbled, with BMW down 1.9 per cent, Peugeot down 3.6 per cent, and Renault down two per cent.

Around Europe, Germany's DAX index ended down 1.6 per cent, UK's FTSE 100 index down 2.6 per cent, and France's CAC 40 down 2.1 per cent.

So far this year, the DAX is down 22 per cent, the FTSE 100 is down 15 per cent, and the CAC 40 is down 23 per cent.