European stock markets closed lower yesterday as fears that sky-high oil prices would cut corporate profits dented sentiment, pulling down airline stocks, while British pay-TV firm BSkyB plunged 19 per cent on subscriber growth concerns.
Swiss bank Credit Suisse fell 2.6 per cent to 38.8 francs and led banks lower after a disappointing update, while Germany's Commerzbank also dampened the market mood with a muted outlook.
Air France lost 3.8 per cent and Deutsche Lufthansa slumped 3.2 per cent as high oil prices spelt earnings worries for the struggling sector, already fighting cut-throat competition and deep cost cuts.
The FTSE Eurotop 300 index of pan-European blue chips fell 0.8 per cent to 975.8 points - just 2.5 per cent below the year's low of 951.95 points. The narrower DJ Euro Stoxx index declined 1.0 per cent to 2,684.3 points.
"Today, there seems to be greater conviction in selling in that there is a rise in volumes. The longer oil prices stay high, the more nervous people will stay," said Akber Khan, director of European equities at Deutsche Bank.
The surge in oil prices to above $44 a barrel, has come at a time when interest rates are rising and making investors nervous about the sustainability of corporate profit growth.
Expectations that the Bank of England will raise interest rates by a quarter point today were reinforced by a key survey showed housing prices rising at their fastest annual pace in more than a year.
Around Europe, the FTSE 100 was 0.5 per cent lower, with the DAX shedding 1.4 per cent, the CAC 40 eased 1.1 per cent and the Swiss blue chip index lost 1.2 per cent.
"Higher oil prices and terror threats imply double trouble for stocks and it seems that not even firm economic data can dig equities out of the hole," said David Brown, chief European economist at Bear Stearns.
Wall Street was weaker yesterday as the rally in oil prices overshadowed upbeat economic data.
The Dow Jones Industrial Average lost 0.32 per cent to 10,088.1 points while the Nasdaq composite index was 0.6 per cent weaker at 1,848.3 points.