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European stocks fall on earnings disappointments

European stocks fell on disappointing earnings announcements Tuesday, with corporations unable to escape the effects of a slowing global economy or fallout from the recent credit crunch.
/ Source: The Associated Press

European stocks fell on disappointing earnings announcements Tuesday, with corporations unable to escape the effects of a slowing global economy or fallout from the recent credit crunch.

"As the markets continue to fall, stock picking will become ever more important going forward," said Marino Valensisi, chief investment officer at Baring Asset Management, which holds US$55.2 billion (euro37.7 billion) under management.

"The quality of companies' earnings will be scrutinized and the winners will be those companies that can deliver on their earnings promises," he said.

Banks Alliance & Leicester, BNP Paribas and Allied Irish Banks all reported gloomy earnings. Dutch brewer Heineken also reported a fall in profits. However, ING Groep upset the trend and rose on upbeat results.

The Dow Jones Stoxx 600 Index dropped 1.2 percent to 320.33. Britain's FTSE 100 Index closed 1.2 percent lower at 5893.60, while France's CAC-40 Index lost 1.5 percent to 4812.81. Germany's DAX Index fell 1.5 percent to 6899.68.

"Meeting earnings forecasts is going to be a rare commodity in the West," Valensisi said.

Alliance & Leicester shares tumbled 6.8 percent after it withdrew profit targets for 2008 and 2009, even though 2007 operating profit was in line with previous guidance.

BNP Paribas confirmed a 42 percent drop in fourth-quarter net profit after making write-downs in the wake of the financial markets crisis. Shares slipped 0.5 percent lower to euro59.69 (US$87.48).

Allied Irish Banks shares reported an 11 percent fall in full-year net profit. The bank also said it forecasts earnings growth slowing in 2008. However, shares closed 3.5 percent higher at euro13.92 (US$20.40) as investors saw value in shares, which are near 12-month lows.

Germany's financial services adviser MLP said fourth-quarter net profit fell 14 percent from the year before, weighed down by higher tax payments in the three months ended Dec. 31. Shares retreated 9 percent to euro10.06 (US$14.74).

Dutch brewer Heineken reported a 33.4 percent fall in full-year net profit. It said it expects profit growth this year, but also expects steep price increases in its raw material and packaging costs. Shares slumped 6 percent to euro36.53 (US$53.54).

A few companies were able to buck the dismal earnings trend.

Dutch financial services company ING Groep outperformed the market after it reported an 18 percent rise in fourth-quarter net profit as investment gains outweighed a euro194 million (US$284.33 million) pretax subprime related write-down. Shares added 0.9 percent to euro21.96.

Spanish power utility Iberdrola posted a 57 percent jump in fourth-quarter net profit, boosted by last year's purchase of Britain's Scottish Power. French state-owned electricity giant Electricite de France reported a flat full-year net profit for 2007.

The two groups, each the largest utility company by market value in their country, indicated they are gearing up for a takeover battle which may reshape Spain's power utility industry before the country's general elections March 9.

Iberdrola shares closed 1 percent lower at euro10.17 (US$14.91) and EdF was down 2.4 percent at euro40.70 (US$59.65).

Mining company Anglo American reported an 18 percent rise in net profit amid strong metal prices and a continued effort to refocus the company on core mining operations. Shares inched up 0.4 percent.

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Kimberly A. Vlach is a correspondent for Dow Jones Newswires.