European shares snap six-day winning run

European shares closed weaker yesterday, snapping a six-day winning streak, weighed by worries of higher US interest rates reinforced by last week's robust US jobs report.

Spanish bank BBVA fell one per cent as investors focused on weaker than expected profits on core lending despite net attributable profit beating average market forecasts.

Europe's third-biggest drugmaker AstraZeneca lost one per cent on news the US Defence Department planned to stop using the firm's blockbuster heartburn and ulcer drug Nexium from this summer.

The FTSEurofirst pan-European 300 index ended 0.4 per cent weaker at 1,081.8 points, after rising 2.5 per cent in the last six sessions.

The narrower DJ Euro Stoxx 50 index fell 0.4 per cent to 3,007.1 points.

Fund managers said markets remained concerned about cautious outlooks from companies.

"Economic data both in the US and Europe has been quite poor, so even if companies are coming in with good numbers, there are worries about future economic growth," said Rita Dhut, head of European equities at Morley Fund Management.

"And in that kind of environment where people are concerned about future growth, they start to look towards stocks that are delivering growth regardless," she said.

Morley is sticking to its defensive investment approach and favours pharmaceuticals, utilities and food retailers, while taking out money from industrials and banks.

By the time European markets closed, US stocks were flat as rising oil prices outweighed optimism over a burst of big-ticket merger news.

Around Europe, Paris's CAC-40 closed 0.3 per cent lower while Frankfurt's DAX and Zurich's SMI fell 0.4 per cent each.

Analysts at Goldman Sachs said Europe's first-quarter earnings appeared to be running slightly weaker than those in the United States.

Of the 150 European companies tracked by Goldman Sachs which have so far reported, around half have revealed earnings above estimates, while 28 per cent came below consensus expectations.

Strategists at Merrill Lynch said though European equities were just three per cent off their highs for the year, sector rotations had been brutally defensive over the past two months.

"Our fundamental starting point is very simple. How will global growth expectations evolve over the coming six months? Our bias remains skewed towards the downside," said David Bowers, chief European strategist at Merrill Lynch.

In London, the FTSE 100 lost 0.17 per cent, stung by weak manufacturing output, while factoring in an expected move by the Bank of England to keep interest rates on hold.

Among companies reporting, Telecom Italia edged up after reporting a nearly four per cent rise in first-quarter core earnings, slightly ahead of forecasts.

Shares in Deutsche Boerse rallied 2.6 per cent after the Frankfurt Stock Exchange operator announced the immediate departure of Chief Executive Werner Siefert.

The exchange bowed to demands from disgruntled investors who had opposed a controversial bid for the London Stock Exchange which was then dropped.

Among the gainers, Kingfisher rallied 5.4 per cent following reports that Europe's biggest home improvements retailer might be a takeover target for US rival Home Depot.

Kingfisher on Sunday denied it was in takeover discussions with Home Depot, but confirmed that executives from the two companies had met for a "routine, long planned" discussion about general issues.