UPDATE 2-European shares end lower on weak earnings, rising inflation concerns

* Oil stocks fall despite strength in crude markets
* STOXX 600 retreats further from 1-year high
* Airbus, Orange slide as earnings disappoint

(Updates to market close)
By Sagarika Jaisinghani and Ambar Warrick
Feb 18 (Reuters) - European shares marked a third straight
day of losses on Thursday as a clutch of disappointing earnings
reports added to concerns over a quicker-than-expected spike in
inflation due to higher commodity prices and a strong euro.
The pan-European STOXX 600 .STOXX dropped 0.8%, with oil
and gas stocks .SXEP leading losses despite higher crude
prices. O/R
Norway's Nel ASA NEL.OL was the worst performer in the
sector after it posted a wider fourth quarter loss, while UK's
Royal Dutch Shell RDSa.L sank more than 3% after it announced
plans to sell its Kaybob Duvernay assets in Alberta.
Oil prices - which recently raced to near pre-pandemic
levels due to a production freeze in Texas - have driven up
expectations that inflation may rise more than expected in the
near term.
High inflation brings the two-fold risk of weighing on
spending, as well as the earlier-than-anticipated scaling back
of monetary policy support by central banks.
"An increase in headline inflation on the back of technical
factors is the worst scenario for the European Central Bank,"
said Carsten Brzeski, global head of macro at ING.
"On the one hand, it could lead to financial markets pricing
in higher inflation expectations and possibly even a policy
reaction, while on the other hand this inflation reduces
purchasing power and will be undermining if not denting the
economic recovery."
Minutes from the ECB's recent meeting showed that
policymakers were concerned over the euro's strength, which
could hit the bloc's major export centres. The benchmark STOXX 600 had jumped to a one-year high this
week on optimism around a global economic recovery, but concerns
over inflation and a sluggish vaccine programme swiftly pulled
it off the peak.
A slate of underwhelming European corporate earnings reports
on Thursday also underscored the deep impact on corporate
earnings from the pandemic.
Planemaker Airbus AIR.PA fell 2.8% as it posted an annual
loss and withheld a dividend due to the COVID-19 pandemic, while
Orange ORAN.PA , France's biggest telecoms group, lost 2.6%
after reporting a drop in core operating profit in the fourth
quarter. Barclays BARC.L shed 4.4% even as it resumed modest
shareholder payouts after a year-long hiatus. In a bright spot, Swiss banking software system developer
Temenos TEMN.S topped the STOXX 600 as it launched a share
buyback programme of up to $200 million. Overall, analysts expect earnings at STOXX 600 companies to
decline by about 20% in the fourth quarter before rebounding
nearly 43% year-on-year in the current quarter, according to
Refinitiv data.