Most European stock indices edged to new 2004 closing lows yesterday as Hewlett-Packard's profit warning hit technology shares and fuel-hungry airlines were hurt by crude oil prices at new record highs.
Britain's FTSE 100 share index managed to close in the black though, helped by utilities and reassuring results from insurer Royal & Sun Alliance.
Among tech issues, France's Altran bled nearly a third of its value as the crisis-hit IT consultancy warned first-half profitability would lag market expectations.
A tripling of second-quarter core profit helped Dutch food company Numico buck the weak trend to end 5.2 per cent higher, while Alstom surged 19 per cent after its controversial rescue rights issue worth €1.75 million ensured the heavy engineering company's immediate survival.
But the generally solid second-quarter earnings reporting season once again took the back seat as investors focused primarily on the threat caused by surging oil prices and monetary tightening to global economic and corporate growth.
The FTSE Eurotop 300 index lost 0.2 per cent to end at 944.4 points - its fourth lower close in five sessions - standing about 1.4 per cent down from the start of the year.
"To be sure, profits growth remains extremely strong. But we know that the (down)turn is indeed imminent," said strategist Albert Edwards at Dresdner Kleinwort Wasserstein.
"This will add fuel to a very twitchy market which is fretting about where the current economic slowdown will end," Mr Edwards said, adding that sub-trend growth and stagnant profits may drive equity markets gradually back to October 2002 lows.
The benchmark FTSE Eurotop 300 index, which had lost 8.5 per cent since April's 22-month high of 1,031 points, still remains 18 per cent above October 2002 lows.
The European tech sector tumbled for a second day, this time affected by US computer and printer maker Hewlett-Packard, which posted disappointing quarterly earnings and warned that profit in the current quarter would also fall short of market expectations.
Among European tech firms, software house SAP slid 3.6 per cent, while Philips Electronics shed 1.4 per cent, and handset maker Nokia was off 2 per cent.
Dutch equipment maker ASML slipped 3.2 per cent after Deutsche Bank removed the stock from its European Pan European Focus List due to a loss in earnings momentum and relatively high valuation.
HP's warning pushed the technology-laced Nasdaq Composite Index 1.2 per cent lower to 1,761, while the Dow Jones industrial average was down 0.8 per cent at 9,858 by 1620 GMT.
Meanwhile in Europe, the FTSE 100 finished 0.4 per cent higher but the DAX shed 0.6 per cent, while the CAC 40 and the Swiss blue chip index both edged 0.25 per cent lower.
Crude prices hit fresh record highs as US-led forces launched a military operation to crush a rebellion in the holy Iraqi city of Najaf, a move which Shi'ite Iraqi militia have warned could trigger fresh attacks on oil infrastructure.
US light crude rose 65 cents to $45.45 a barrel, the highest price in 21 years of trade on the New York Mercantile Exchange, while London's Brent crude futures rose 51 cents to hit a new peak of $42.08.
Rising fuel costs, as well as tough competition, pushed German air carrier Lufthansa to trim its 2004 operating profit guidance after reporting weaker than expected second-quarter earnings. Its shares slipped 3.7 per cent.
Things looked rosier for Shell, up 1.4 per cent as high oil prices fuelled hopes of new record profits for oil majors.
Elsewhere, utilities were lifted by E.ON, up 2.2 per cent after the German group raised its operating profit guidance for this year, citing enhanced efficiency across the group.
In the insurance sector, Aegon fell 3.4 per cent, hit by unexpectedly high second-quarter bond losses and weak sales in its core life insurance business.
But UK insurer Royal & Sun Alliance relieved investors with first-half profits slightly ahead of forecast, a confident capital outlook and the absence of any nasty surprises. Its shares closed 3.6 per cent higher.