Europe shares lose 2% on economy, writedown fears

By Sitaraman Shankar

LONDON, Feb 15 (Reuters) - European shares ended sharply lower on Friday, reflecting growing investor concern over the U.S. economy and the prospect of more writedowns at top banks as a result of the credit crisis.

The FTSEurofirst 300 index of top European shares ended 1.96 percent lower at 1,309.34 points, with banks the top weighted losers as investors switched to select defensive food and pharma stocks.

French bank Natixis (CNAT.PA: Quote, Profile, Research) was the top loser on the FTSEurofirst 300, tumbling 11 percent after it unveiled more than 1 billion euros ($1.5 billion) of writedowns linked to the credit crisis.

UBS (UBSN.VX: Quote, Profile, Research) fell 3.8 percent, taking its losses for the week to around 12 percent as Citigroup said in a note that it expected more writedowns at the Swiss bank.

Preliminary February consumer sentiment data in the United States disappointed, a gauge of manufacturing in New York State hit its weakest level since April 2003 and electronics retailer Best Buy (BBY.N: Quote, Profile, Research) issued a profit warning, shaking U.S. stocks.

And Citigroup (C.N: Quote, Profile, Research) said it had suspended investor withdrawals from a $500 million credit hedge fund to give it a chance to "stabilise".

"The signs are that the U.S. is gradually slipping into recession, the world economy is slowing, subprime problems are not going away and the technical picture looks dismal everywhere," said Philippe Gijsels, strategist at Fortis Bank in Brussels.

"We would recommend selling into any strength, reducing exposure to equities to neutral or underweight during any rally."