European stocks fell on Friday, led by Cap Gemini SA and Royal Philips Electronics NV, after Microsoft Corp and International Business Machines Corp said they don't expect demand to recover soon. The Dow Jones Stoxx 50 Index erased its gain for this year.
Allianz AG and Banco Bilbao Vizcaya Argentaria SA declined as concern about earnings prospects prompted analysts to cut recommendations for some insurers and banks.
The Stoxx 50 shed 2.7 percent, its biggest drop this year, to 2,382.52. The Stoxx 600 Index lost 2.3 percent, with banks generating almost a quarter of the slide.
"Hardly any companies are saying anything positive and I don't expect that to change this quarter," said Corne Biemans, who manages 1.4 billion euros (US$1.5 billion) for Fortis Investment Management in Utrecht, the Netherlands.
"You shouldn't expect profit to improve until the end of the year."
The Stoxx 50 has fallen 4.2 percent this week, its second weekly decline this year. Prudential Plc, the UK's second-biggest insurer, and Nokia Oyj, the world's largest mobile-phone maker, led the drop, losing more than 9 percent each. The Stoxx 600 Index has shed 3.3 percent this week.
Benchmarks dropped in all of the 17 Western European markets, led by the German DAX Index's 4.4 percent retreat. France's CAC 40 Index shed 2.7 percent, and the UK FTSE 100 Index declined 1.6 percent. Nine Stoxx 600 shares declined for every two that advanced, as every industry group fell.
Cap Gemini, Europe's biggest computer-services company, slid 6.9 percent to 24.98 euros.
Philips, which makes about half its sales from consumer electronics and semiconductors, dropped 5.7 percent to 16.45 euros. Philips's senior debt rating was cut one level to Baa1 by Moody's Investors Service on concern it may not meet a cost-cutting goal.
SAP AG, the world's biggest maker of business-management software, lost 4.6 percent to 85.58 euros. STMicroelectronics NV, Europe's largest chipmaker, tumbled 6.7 percent to 18.56 euros.
Business Objects SA, a French software maker, dropped 9.1 percent to 15.75 euros, for a two-day decline of 11 percent.
Infogrames Entertainment SA, Europe's biggest video-game maker, lost 5.6 percent to 3.21 euros.
BBVA, Spain's second-largest bank, fell 6.1 percent to 9.63 euros. ABN Amro Holding NV, the biggest Dutch lender, slid 5.6 percent to 15.30 euros. Both were cut to "underperform" from "neutral" by Credit Suisse First Boston. Santander Central Hispano SA lost 4.7 percent to 6.75 euros after CSFB cut the biggest Spanish bank to "neutral" from "outperform."
Allianz fell 3.6 percent to 89.70 euros. Morgan Stanley lowered its earnings forecast for Europe's biggest insurer, citing concern that the value of Allianz's investments will decline.
Axa SA, Europe's second-largest insurer, shed 5.6 percent to 12.64 euros. Aegon NV, No. 2 in the Netherlands, fell 4.6 percent to 12.96 euros.
Mediolanum SpA slid 7.3 percent to 4.82 euros. The insurance and financial-services company, partly owned by Italian Prime Minister Silvio Berlusconi, said assets under management last year shrank.
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