Euro Stocks End Lower Ahead of Fed

European stocks closed lower across the board Wednesday as bigger-than-expected writedowns from UBS added to the general gloom surrounding the banking sector and did nothing to calm investors’ jitters ahead of an expected interest rate cut in U.S.

Investors are expecting the Federal Open Market Committee to cut interest rates by a further 50 basis points, according to fed funds futures, to revive the floundering U.S. economy. The rate decision will be announced at 7:15 pm London time.

Before the bell, UBS reported that more writedowns associated with fresh subprime losses plunged its full-year profit into negative territory. The bank said writedowns in the fourth quarter amounted to $14 billion, which led to it report an $11.45 billion loss. Shares of the Swiss bank ended 1.6 percent lower.

"What we are seeing is very different standards applied to subprime writedowns," Guy Monson from Sarasin Investment Management told "European Closing Bell."

"I think that's creating uncertainty, as there isn't really a model for this," Monson added.

Staying in the financial sector, BNP Paribas lowered its estimates in its upcoming fourth-quarter profit. But CEO Baudouin Prot increased speculation the French bank could be ready to bid for troubled rival Societe Generale by saying the lender is "pursuing its development drive." Shares of BNP fell 1.4 percent, while SocGen shares closed 4.3 percent higher after denied reports the bank would be open to takeover offers.

Societe Generale's board gave a seal of approval to the bank's chairman, Daniel Bouton, despite pressure from French politicians that he should step down because of the "rogue trader" scandal which cost the bank nearly 5 billion euros ($7.3 billion).

The bank also set up a committee to probe the scandal.

"2007 has been a horrible year for the banks and the sector is not out of the woods yet. Currently, banks are trading at a price to book ratio of 1.4, and the historical average has been 1.1 to 1.2," said Franz Wenzel, strategist at AXA Investment Managers, told Reuters.

S&P added to the negative sentiment by cutting its outlook for Barclays, Allianz, Deutsche Bank, Fortis and UBS.

In earnings news, SAPposted a solid outlook on its 2008 revenue after meeting analysts' expectations on its fourth-quarter figures. CEO Henning Kagermann told CNBC Europe the company saw no indication that they will change their spending behavior. Shares rose by 0.7 percent.

Swiss pharmaceutical company Roche's earnings also beat forecasts with a 25 percent rise in full-year net profit to $10.44 billion on strong sales of its cancer drugs. Roche gained 2.2 percent.

And German automaker BMWreported that revenue rose by 14 percent in 2007. The company confirmed full-year earnings guidance and said it expects a record year in 2008, pushing shares 0.6 percent higher.