European stocks closed lower yesterday after steep losses on the Nikkei and disappointing results from US tech giants, while a higher oil price renewed concern that energy costs could erode profits.
The FTSEurofirst 300 Index of leading European shares closed 0.94 per cent down at 1,285.25 points in heavy volumes after earlier dropping to 1,279.29 - its lowest level since the end of December.
"Oil is still high, earnings momentum has effectively stalled in the US and the market has become a bit complacent to the extent which Fed funds could rise. So the pullback was there and has gained momentum from what has happened in Japan," said Gareth Evans, European equity strategist at ING.
Volumes were much higher than normal with around 3.2 billion shares traded on the index compared with an average daily figure of about 2.5 billion.
Still, European stock markets found some support in afternoon trade as investors bought stocks at cheaper prices and after higher earnings from JPMorgan Chase & Co. helped certain banking stocks pare their losses. "We are starting to see people coming back into the market and trying to pick up off the bottom," a trader said.
But caution prevailed as Wall Street fell and after the Tokyo bourse shut 20 minutes early as trading volumes threatened to exceed the exchange's system capacity, with the heaviest selling yet again in internet firms following an investigation into internet portal Livedoor.
Techs were among the biggest decliners in Europe with French-Italian chip maker STMicroelectronics down around two per cent and Finnish mobile phone maker Nokia down around one per cent.
But auto stocks also suffered from the higher oil price with German car maker DaimlerChrysler down 2.2 per cent, while general worry about corporate profits and markets dragged the insurance sector, knocking Benelux insurer ING and German insurer Allianz around 2.5 per cent.
A rise in US crude prices to $66.25 a barrel was triggered by concern that new attacks on Nigeria's oil industry could further hit supplies from the world's eighth-biggest exporter. Continuing tensions between Iran and the West over its nuclear programme further pressured the oil market.