European stocks closed sharply lower Friday, with banks suffering the worst of the selling as investors braced for further writedowns from the sector.
Shares of UBS were heavily soldoff following warnings from Citigroup analysts that the Swiss banking giant might face an additional writedown of up to $18 billion in 2008.
Bearish comments about the outlook for the U.S. economy from Federal Reserve Chief Ben Bernanke on Thursday added to the reluctance to buy.
Bernanke's Congressional testimony Thursday sent the U.S. market lower as investors zeroed in on the chairman's somber assessment that the U.S. economy has weakened in recent months and the risks to growth had increased. Wall Street remained in the red on Friday.
In European corporate news, Deutsche PostCEO Klaus Zumwinkel will resign from the German mail and logistics group, the company said, after prosecutors said they suspected him of dodging about $1.5 million in taxes by transferring money to tax haven Liechtenstein.
Also in Germany, Deutsche Postbank reported a 39 percent decline in fourth-quarter net profit, but emerged unscathed from the subprime crisis, writing off only 112 million euros ($163 million).
Meanwhile, French investment bank Natixis wrote off 1.2 billion euros, wiping out more than half its expected full-year profit. Shares of the bank plummeted 10.7 percent.
Also in France, tire maker Michelin's full-year profit rose after the company benefited from cost cuts and price increases. Michelin predicted another rise in profit in 2008, but said the year would be challenging and have multiple uncertainties. Shares fell 2.8 percent.
Meanwhile, warm European weather and higher operation costs dampened Gazprom's 9-month profit, but the gas monopoly still beat Reuters' expectations for quarterly profit on a boost from higher domestic prices and appreciation of the rouble.
And, Swedish fashion retailer Hennes & Mauritz reported a 3 percent rise in January sales at stores open more than a year. Shares ended lower by 2.1 percent as the sales figures came in slightly below market expectations.