Europe stocks retreated Thursday, as worries about the health of credit markets weighed on financials and oil prices and the euro renewed their record run. The pan-European Dow Jones Stoxx 600 index fell 1.3 percent to 311.42 as financials weighed, giving back gains made in the previous session. «It's still all about the credit-market crisis and the negative spillover effects this has on equities. We are seeing credit markets trading lower with crossover spreads near record highs,» said Gerhard Schwarz, strategist at UniCredit Markets. «Financial sectors are probing new lows amid fear of further write-downs and uncertainty over the health of bank balance sheets,» he said. Also, policymakers at both the European Central Bank and the Bank of England kept rates steady Thursday, as expected, as they continued to highlight worries about inflation trends. The French CAC-40 index slipped 1.7 percent to 4,678.05, while the U.K. FTSE 100 index closed down 1.5 percent to 5,766.40 and the German DAX 30 index fell 1.4 percent to 6,591.31. Across the Atlantic, U.S. stocks opened in the red as investors were confronted by more bleak news from the financial sector, including word of a default at mortgage lender Thornburg Mortgage Inc. and Merrill Lynch & Co. raising the conversion rates of some securities. European companies detailing exposure to the troubled U.S. housing market Thursday included Aegon and Carlyle Capital. Shares of Dutch life insurance and pension provider Aegon fell 5.7 percent. The company said that it booked a 26 percent decline in net profit to ¤648 million (US$993 million) for the fourth quarter and took a total negative charge of ¤487 million (US$746 million) on subprime and near-prime U.S. housing-related investments and CDOs. Meanwhile, shares of Carlyle Capital Corp. fell 58 percent in Amsterdam after the investment fund managed by private-equity giant Carlyle Group said it failed to meet margin calls from four counterparties and has received one default notice. And shares of UBS dropped 4.7 percent, with J.P. Morgan calling it «highly likely» that the Swiss bank had sold its Alt-A portfolio, valued at 25 billion Swiss francs (US$24.1 billion (¤15.73 billion)), in a fire sale. UBS said it did not comment on rumors. The euro rose to a fresh high of US$1.5377 against the dollar after ECB President Jean-Claude Trichet highlighted the possibility of protracted inflation in a speech Thursday afternoon, while crude oil printed another record of US$105.97 a barrel. Both events cast further gloom on prospects for European corporate earnings. «We currently have the slowest earnings momentum for four years in Europe, so everything that normally weighs on earnings is having an above-average impact _ such as record levels for oil and the euro. I expect earnings estimates to decline further,» said Gerhard Schwarz. Gains for oil prices usually lead to losses for airlines, and Thursday was no exception. Shares of Air France-KLM fell 5.9 percent, while Deutsche Lufthansa surrendered 3.5 percent. Shares of British Airways dropped even more, down 7.6 percent. The carrier said earlier it would miss its goal of generating a 10 percent operating-profit margin next year, citing fuel prices and slowing global economic conditions. Still, there was some good news on earnings out Thursday. Shares of Carrefour climbed 4.1 percent after 2007 net profit at the French supermarket giant rose 1.3 percent to ¤2.3 billion (US$3.52 billion) and it unveiled plans to switch its focus to real estate management. The news came after the Halley family, Carrefour's top stockholders, said late Wednesday it would dissolve its shareholder pact, which may put Bernard Arnault and Colony Capital in a position to become the biggest owners in the French retailing giant. In the utility sector, shares of E.On rose 1.3 percent. Germany's largest utility by valuation topped market expectations by reporting a 9 percent increase in 2007 net profit due to a solid operating performance at its power-generation operations, especially in Central Europe. It also said that it doesn't intend to expand in its domestic market through mergers and acquisitions. Meanwhile, shares of Dutch chemicals firm Azko Nobel jumped 9.1 percent. Fourth-quarter net income improved to ¤8.5 billion (US$13.02 billion) from ¤230 million a year ago, boosted by the sale of its Organon BioSciences division.
