European stocks fell in morning trade on Friday as sinking oil prices were driving down heavyweight energy shares, while mining stocks came under pressure from profit worries.
At 0928 GMT, the pan-European FTSEurofirst 300 index of top European shares was down 0.9 percent at 819.61 points, losing ground for the sixth time in seven sessions.
The FTSEurofirst 300 index of top European shares is down 45.6 percent so far in 2008, knocked down by a crisis in the credit markets that sparked a global economic downturn.
Energy stocks took the most points off the index, as oil fell below $36 a barrel, after falling more than 20 percent this week to its lowest since June 2004.
BP, StatoilHydro, BG Group, and Royal Dutch Shell fell 1.3-3.3 percent.
"Energy stocks are hit badly by the low oil price that appears to be in free fall," said FrankfurtFinanz market analyst Heino Ruland.
"And there is still room for them to bottom out if oil prices should settle in a $20-30 range. I don't see the year-end rally many have hoped for. Buying in now — given the bad economic macro data — is not a good idea."
Miners also retreated, after Shanghai copper futures tumbled by their 4 percent downside limit on Friday, reaching a five-year low.
Antofagasta, Rio Tinto and Anglo American declined 3.1-4.5 percent.
"Mining stocks are still trading at relatively high multiples and I believe that we will see some hefty downwards revisions in that sector," said Darren Winder, head of strategy research at Cazenove.
In addition, UBS downgraded Anglo American, Xstrata and Antofagasta to "neutral" from "buy" on worries for profits as commodity prices fall.
BANKS DOWN, EARNINGS FEARS
Banks were also weighing on the benchmark index, with the DJ Stoxx European banking sector index down 1.1 percent.
Merrill Lynch cut its earnings estimates for European banks by 15 percent for 2009 and by 25 percent for 2010, saying leverage will remain a key concern.
"We think the impact of de-leveraging could mean estimates need to fall still further in due course," the brokerage said in a note.
Shares in Anglo Irish Bank plunged more than 40 percent to a new record low of just 0.19 euros after Chairman Sean FitzPatrick resigned, admitting he had transferred loans totalling 87 million euros ($125.1 million) to another bank over an eight year period.
Italy's UniCredit fell 2.2 percent after it said 2008 net profit would be 23 percent less than forecast in October, if it does not manage to sell property assets.
Bucking the downwards trend was French bank Societe Generale , which rose 1.3 percent, after announcing the U.S. hedge fund group GLG Partners had agreed to buy the UK fund management business.
European shares also tracked a fall in U.S. stocks, where investors were jittery after Standard & Poor's threatened to strip U.S. conglomerate General Electric of its 'AAA' credit rating.
Cazenove's Winder added that whether or not European stocks would stay at their currently depressed levels will depend on how the U.S. markets will perform later today.
