Mixed news from utility giant E.ON and media group Vivendi, and concerns about high oil prices and US interest rates pushed European shares to a fourth consecutive lower close yesterday.
Basic producers also weighed as copper prices shed some of Wednesday's strong gains, with Rio Tinto hit further amid worries the Anglo-Australian miner may seek to top rival BHP Billiton's $7.4 billion offer for WMC Resources.
By 1650 GMT, the FTSEurofirst 300 index of pan-European blue chips was off 0.8 per cent to 1,085.3 points, while the narrower DJ Euro Stoxx 50 index fell 0.9 per cent to 3,053.9 points.
The FTSEurofirst 300 hit a fresh 33-month high of 1,109.53 points on Monday but has lost 2.2 per cent since then as oil prices near record highs fuelled worries about corporate margins, and as heightened US interest rate worries sparked a savage sell-off in government bonds on Wednesday.
Yesterday afternoon, US Treasuries struggled higher after an unexpectedly soft reading on US initial jobless claims forced some short-covering, but the bounce was trivial compared to the week's titanic losses.
"Bonds are trading like a bear with a sore head," said economist David Brown at Bear Stearns. "Rising US core inflation risks, strong commodity price gains, US growth moving above trend, tightening US labour markets, the weak dollar and the Fed poised to strike back even harder have rattled bond market's mood."
Around Europe, London's FTSE 100 index shed 0.7 per cent, like Paris's CAC 40, while Frankfurt's DAX was 0.9 per cent weaker and the Swiss Market Index trimmed 0.3 per cent in Zurich.
Disappointing results compounded the negative sentiment.
E.ON shed 2.8 per cent after Europe's largest listed utility reported a lower-than-expected rise in its 2004 dividend, issued a cautious outlook for 2005, and unnerved investors with comments that it was considering major acquisitions.
Elsewhere, shares in Belgian supermarket chain Delhaize fell 7.9 per cent after disappointing fourth quarter margin growth offset slightly higher 2004 operating profit.
Other standout performers included heavily-weighted energy stocks like BP and Shell, both down two per cent after a US rival Exxon cautioned shareholders that surging oil prices did not mean its results would be anything more than "boringly consistent".
Despite the downbeat market mood, hotelier InterContinental attracted plenty of buyers after revealing its 2004 profits jumped by a third and promising to return one billion pounds to shareholders. Its shares rose three per cent.