By Amanda Cooper
LONDON, Feb 22 (Reuters) - European shares ended down on
Friday as downbeat results from Germany's RWE <RWEG.DE> hit
utilities and poor U.S. data fed concern that the world's
largest economy is headed for recession, which weighed on bank
stocks.
RWE shares fell nearly 6.5 percent after Germany's
second-largest utility earned less than expected and said
earnigns could be flat this year, which knocked shares in rivals
such as E.ON <EONG.DE>.
Auto stocks led by Renault <RENA.PA> and Fiat <FIA.MI> felt
the pinch of a broker downgrade and a rise in the euro <EUR=>,
which makes their exports less competitive.
The FTSEurofirst 300 index <> of top European shares
ended down 0.8 percent at 1,320.04 points. The index has fallen
nearly 13 percent since the start of the year.
The broader European market has risen for the second week in
a row, but sentiment has been plagued by worries about the
resilience of the U.S. economy and corporate profitability.
"The markets are being pulled between information on the
here and now, which is quite discouraging, and hopes that more
aggressive action to try to reflate the U.S. economy in say nine
months' time will (make things) look a lot better," said Andrew
Bell, a European strategist at Rensburg Sheppards.
U.S. markets came under pressure after a broker downgrade of
the two largest home financing companies, Freddie Mac <FRE.N>
and Fannie Mae <FNM.N>, and after regional manufacturing data on
Thursday reinforced the belief the economy is in recession.
RWE was the biggest percentage loser on the European index
after it reported profit below expectations. German rival E.ON
<EONG.DE> fell 2.2 percent.
"RWE has missed its numbers and is definitely pulling down
the sector," Philippe Gijsels, senior equity strategist at
Fortis Bank said.
"Visibility on the earnings side is extremely low... Until
that uncertainty lifts, we will be extremely cautious on the
markets ... We think troubles are not over yet," Gijsels added.
French utility Gaz de France <GAZ.PA> lost 4.3 percent,
while Spain's Iberdrola <IBE.MC> fell 1.9 percent.
AUTOS, FINANCIALS DRIVE DOWN
Carmakers were among the main losers, with Renault falling
4.5 percent after Europe caught up with a price target cut that
Morgan Stanley released late on Thursday.
Fiat, Porsche <PSHGp_DE> and Peugeot <PEUP.PA> were among
the top losers on the FTSEurofirst 300, as a combination of
worry over high commodity prices and the U.S. downturn hit the
entire sector. The DJ Stoxx index of European automakers was
down 2.9 percent <.SXAP>.
"These stocks were priced much higher (in 2007) than they
usually would be in a normal cycle... Every time you have bad
news in the economy, these companies hurt -- if raw materials
rise it will hurt automakers; if the dollar is weak, it will
hurt automakers; if the U.S. consumer is in trouble, it will
hurt the automakers," Gijsels of Fortis Bank said.
The euro <EUR=> hit two-week highs against the dollar.
Around Europe, London's FTSE 100 <> and Paris' CAC-40
<> both fell 0.7 percent, while Frankfurt's DAX <>
lost 1.4 percent.
Financials, which have borne the brunt of the fallout from a
crisis in the U.S. subprime mortgage market, were mixed.
Lloyds TSB <LLOY.L> raised the writedown on its exposure to
risky assets to 280 million pounds, but as it still managed a 6
percent rise in underlying 2007 profit and increased its
dividend, its stock jumped 4.8 percent.
France's BNP Paribas <BNPP.PA> fell 0.8 percent, and
Germany's Postbank <DPBGn.DE> gained 1.7 percent. UBS <UBSN.VX>
shares lost 1.9 percent.
The Financial Times said UBS, which has revealed nearly $18
billion in subprime writedowns, has contacted some of Europe's
top bankers to join its board of directors and eventually
replace the Swiss bank's chairman, Marcel Ospel.
(Additional reporting by Golnar Motevalli, editing by Will
Waterman)
