European shares lost ground on Thursday, hitting their lowest point so far this year after the European Central Bank reinforced its willingness to raise rates to counter inflation.
The FTSEurofirst 300 index of top European shares ended the day down 0.78 percent at a provisional 1,437.72 points, with banks, oil and chemicals shares among the worst performers.
Alliance & Leicester fell 4 percent, HBOS slipped 4.3 percent and Barclays lost 1.3 percent.
Oil dropped $2 a barrel, depressing index heavyweight oil shares. BP fell 0.9 percent, Royal Dutch Shell lost 1.3 percent and Total dropped 1.7 percent.
"(ECB president Jean-Claude) Trichet is still sounding very hawkish judging by his warnings of higher inflation and his threat that the ECB would be prepared to act pre-emptively to cap any further inflation pressure," Bear Stearns said in a note.
But, it added, it expected the pendulum to swing towards lower ECB rates from May onwards.
Both the Bank of England and the ECB kept rates steady on Thursday.