LONDON: A grim profits warning from Rolls-Royce sent the British engine maker's shares crashing by a fifth on Thursday, as a raft of disappointing earnings rocked European equities with Wall Street catching the gloomy mood.
The company's share price slumped 19.57 percent to 536.50 pence at the close in London after Rolls delivered its fourth profits warning in a year, helping the FTSE-100 index to shed 1.88 percent over the session.
Rolls-Royce said 2016 profits would take a hit of £650 million ($986 million, 918 million euros) as a result of weak demand in its aerospace and marine markets. That compared with a previous estimate of £300 million given in July.
In addition, the group cautioned that 2015 pre-tax profit would be "at the lower end" of its forecast range of between £1.32 billion and £1.47 billion.
"While 2015 remains broadly as expected, the outlook for 2016 is very challenging," chief executive Warren East declared.
Elsewhere in Europe, the energy sector also suffered.
In Frankfurt, shares in German giant RWE tanked 9.6 percent to 11.27 euros after saying 2015 profits would "only just" meet the company's forecast range of between 1.1 billion euros and 1.3 billion euros.
RWE added that profits slid in the nine months to September, hit by an operating loss at its troubled British division Npower.
The second biggest faller in Frankfurt was peer E.ON, whose stock sank 3.2 percent to 8.88 euros.
In Madrid, Repsol shares dived 7.3 percent to 11.23 euros after the Spanish oil giant revealed that it swung into the red in the third quarter.
The company posted a net loss of 221 million euros in the July-September period, and blamed lower oil prices and US asset writedowns.
"A cavalcade of concerns left the European indices in a uniform shade of red this morning, including a truly nightmarish performance from Rolls-Royce," said analyst Connor Campbell at traders Spreadex.
Investor sentiment was also subdued as traders awaited a speech on Thursday from Federal Reserve chief Janet Yellen hoping for clues about US interest rates.
Ahead of her address, oil companies were buffeted by another sharp fall in the price of crude.
ExxonMobil lost 1.3 percent and Chevron 2.1 percent in early US trade as US crude prices dropped more than $1.00 a barrel while commercial stockpiles remain high.
The euro was meanwhile under pressure on Thursday after European Central Bank President Mario Draghi said economic risks to the region were "clearly visible", stoking speculation over more stimulus measures.
In afternoon trading, London's benchmark FTSE 100 index fell 1.8 percent to close at 6,178.7, Frankfurt's DAX 30 shed 1.15 percent and the CAC 40 in Paris lost 1.9 percent compared with Wednesday's close.
"There's little doubt that some tough earnings figures are currently weighing on European markets, but there's also an impression that investors are very much waiting on Janet Yellen's speech," added ETX Capital analyst Daniel Sugarman.
"All it would take is a couple of sentences to dramatically change the market mood."
Last Friday's forecast-beating US jobs report reinforced recent data showing the world's biggest economy is picking up, stoking speculation over a December rate hike.
However, analysts said markets are uneven as the Fed mulls a lift-off, while other central banks -- particularly in Europe, China and Japan -- hint at further easing to kickstart growth at home.
US stocks also fell in opening trade as Yellen prepared to speak, with European close falling crude prices pulling down shares in oil companies.
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