LONDON: European shares fell on Wednesday after profit warnings from US companies compounded fears the sluggish global economy will erode earnings, while scepticism over the euro zone's ability to tackle its debt crisis pressured other risk assets.
The euro wallowed around two-year lows against the dollar at $1.2260 although industrial commodities and oil regained their footing after sharp falls on Tuesday.
"Risk appetite remains fragile as US earnings worries and various unanswered questions in Europe weigh on sentiment," analysts at Credit Agricole said in a note to clients.
Recent data showing slower growth in Europe, China and the United States has weighed on equities markets, and US companies, which this week began the second quarter reporting season, have warned about the impact this is having on sales.
US stocks fell for a fourth straight day on Tuesday on the growing pessimism while in Asia, MSCI's index of Asia-Pacific shares outside Japan . touched a one-month low as its big exporting firms experienced similar headwinds.
Samsung Electronics, the world's largest memory chip maker was down 0.2 percent, and SK Hynix, the second largest slumped 3.2 percent following the weak forecasts from US chipmakers Applied Materials Inc and Advanced Micro Devices.
The FTSEurofirst 300 index of top European companies was down 0.6 percent at 1,033.34 points in early trading, largely reversing the previous session's gains.
MSCI's world equity index extended its fall into a sixth straight day to be down 1.25 percent for the month to date although Wednesday's losses were slight.
In Europe concerns over the pace of developments to ease the debt crisis and the impact of the European Central Bank's move to cut the deposit rate it charges banks to zero kept the single currency near a two-year low of $1.2225 set on Monday.
The euro was changing hands at $1.229, up 0.3 percent, but had fallen to a 3-1/2 year low against the British pound of 78.87 pence, as investors sought safety from the crisis.
"While the euro could see some short-term corrective moves against the dollar, it is really difficult to think of taking long positions in the coming months, considering Europe's situation," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
Spain, which has already called on it euro zone partners for help in bailing out its troubled banks, unveiled a package of measures to reduce its fiscal deficit as it battles to cut borrowing costs.
Spanish Prime Minister Mariano Rajoy said he would raise value-added tax by 3 percentage points to 21 percent and planned a new tax scheme for the energy sector as part of the package to trim the deficit by 65 billion euros over the next 2-1/2 years.
Spanish 10-year bonds were down around 0.25 of a percentage point to 6.8 percent after the announcement following steady falls this week after Madrid reached agreement with its euro zone partners to relax its deficit deadline.
