A glum profit outlook from mobile phone giant Nokia sent European shares to their lowest close in two months yesterday as investors feared 2004 earnings might not live up to high expectations.
Marks & Spencer also weighed, slumping 5.2 per cent to 345 pence after entrepreneur Philip Green walked away from a £9.1 billion bid for the UK retailer after its board refused him access to its books.
The FTSE Eurotop 300 index of pan-European blue chips ended 1.1 per cent weaker at 969.4 points, its lowest close since May 19.
Turnover was a hefty €3.2 billion, while falling stocks outnumbered those that rose by about four to one.
Nokia's grim outlook sapped confidence as the second-quarter earnings season begins to gather pace. Credit Suisse First Boston said earnings momentum had turned down after hitting a record peak in Europe and the United States in May.
"In the near term, this makes for a difficult backdrop for the market when coupled with the seasonal effects of a weak third quarter," CSFB analyst Nick Nelson said.
"There are also the additional global headwinds of a stubbornly high oil price, geopolitics and tightening global liquidity."
The narrower DJ Euro Stoxx 50 index fell 1.4 per cent to 2,715.6 points.
Nokia crashed 11.5 per cent to a near six-year low of €10.06 after warning that profits for the rest of the year would be under pressure as rivals attacked its core handset business.
"It's not the market - we saw Sony Ericsson come out with stellar numbers this morning... There is a bit of a price war, but really Nokia just got it wrong," said Daniel Birch, a strategist at independent brokers Execution.
Sony Ericsson reported stronger-than-expected second-quarter sales and profit and gave an upbeat forecast, but Nokia's results overshadowed its figures, and Ericsson shares ended 6.7 per cent lower.
European banks were dented by weak results from Nordic investment bank Carnegie and uninspiring numbers from US heavyweight Citigroup, which were blighted by a nearly $5 billion charge for legal costs.
Credit Suisse shed 3.6 per cent, Royal Bank of Scotland eased 2.6 per cent and UBS ended 2.8 per cent lower.
"I think there's a bit of concern about how easy it is for investment banks to contain their costs in this environment with no real revenue improvement," one senior dealer said.