US rate fears cap Eurostocks, Tel Austria shines

European shares snapped a four-day winning streak yesterday amid gnawing concerns over the threat of higher US interest rates, but Telekom Austria was a bright spot on speculation of fresh takeover talks.

Deutsche Post also did well, climbing 3.4 per cent after the group said it would cut its asking price and slash the number of shares it is selling by one third in its delayed flotation of Postbank.

Post conceded a victory to investors who had long said the stock in the IPO was overpriced. The retail bank's debut is now scheduled for tomorrow.

But Italian oil and gas group Eni and leading utility Enel fell more than four per cent after both stocks went ex-dividend, meaning buyers no longer qualify for the companies' latest payout.

Heavily-weighted oil stocks such as BP, down 1.2 per cent, fell as crude prices retreated after having jumped on news that Iran had seized three British vessels. Traders said they were watching for further developments.

The FTSE Eurotop 300 index of pan European blue chips shed 0.12 per cent to close at 1,008.35 points, while the narrower DJ Euro Stoxx 50 index slipped 0.19 per cent at 2,816.56 points.

Volumes amounted to barely just over €1.8 billion, nearly half the usual daily average.

Prospects of higher US interest rates and fears that these could hamper global economic growth remained the overriding concern for investors as the Federal Reserve's June 30 rate-setting meeting approached, strategists said.

Such worries have swept European stock indices down from near two-year peaks set at the end of April, said strategists, who added that these concerns should continue to cap sentiment in the near term.