Car shares led European stock indices to a lower close yesterday, with Germany's Volkswagen and DaimlerChrysler worst hit amid concerns over how much the ailing dollar might have dented earnings in the eurozone.
DaimlerChrysler posts its second-quarter results on Thursday while Volkswagen reports on Friday, with many analysts expecting top names in the auto sector to unveil sharply lower profits as the weak dollar adds to worries of slowing demand for cars.
German software firm SAP and French telecoms equipment maker Alcatel also contributed to the market's march down, continuing last week's slide as the sector continues to be rattled by gloomy guidance.
"Sentiment remains fragile... We are still waiting for signs that companies are rebuilding margins and investing again," said Valerie Plagnol, strategist at French bank CIC Securities.
By 1600 GMT, and with only Frankfurt still officially trading, the FTSE Eurotop 300 index was down 0.93 per cent at 851 points, while the DJ Euro Stoxx 50 index shed 1.6 per cent to 2,421 points.
Britain's FTSE closed 0.7 per cent lower, France's CAC-40 was off 1.5 per cent and the Swiss Market Index 0.6 per cent weaker. Germany's DAX was down 2.3 per cent by 1545 GMT.
Europe was also weighed by Wall Street, where the Dow Jones eased 1.2 per cent and the tech-rich Nasdaq Composite fell 1.9 per cent, pressured by a profit warning from printer maker Lexmark and a broker's bearish call on Motorola Inc..
DaimlerChrysler and Volkswagen were down about 3.3 per cent each, while French peer Renault, which reports on Thursday, shed 2.2 per cent.
A Reuters poll of 30 analysts said DaimlerChrysler will post an 83 per cent drop in second-quarter operating profits due to a collapse in earnings at its US Chrysler arm.
"The second quarter is going to be a very difficult quarter for most auto companies. Earnings will be down for almost every auto manufacturer with the exception of possibly Porsche, truck companies and select parts and tyre companies," said Adam Jonas, industry analyst at Morgan Stanley.
The DJ Stoxx European autos sector rallied some 20 per cent over the past two months, prompting many investors to pocket their profits before companies start releasing numbers.
But shares in Porsche, the world's most profitable car company, gained 1.6 per cent after management told investors at the weekend that the firm was on track to post a clear rise in profits and sales this business year, analysts said.
Technology shares accounted for many losses amid fears that quarterly figures from German and French-Italian chipmakers Infineon and STMicroelectronics and German conglomerate Siemens later this week may not justify a recent rally fuelled by hopes of improvements in the sector.
But Franco-American software company Business Objects bucked its sector, surging 10 per cent as investors hailed synergies from its planned acquisition of US firm Crystal Decisions and market-topping second-quarter earnings.