European stocks dip despite strong US retail numbers

European shares dipped yesterday, led by car and oil stocks, as investors cashed in recent gains amid worries the US Federal Reserve could further hike interest rates after a jump in US retail sales.

The pan-European FTSEurofirst index of 300 leading shares eased 0.2 per cent to 1,330.19 points after earlier rising to a four-and-a-half-year high, according to unofficial closing prices.

Markets reversed some losses in the last two hours of trading after an unexpected rise in US retail sales lifted Wall Street, with the Dow Jones gaining 0.9 per cent by 1635 GMT.

Paris' CAC 40 dipped 0.1 per cent and Britain's FTSE 100 share index ended down 0.02 per cent, in contrast to Germany's DAX, which edged 0.1 per cent higher, unofficial data showed.

Among biggest sector decliners were car stocks, which ended their two-day rally, with BMW slipping 1.5 per cent, while Volkswagen dropped 0.8 per cent and DaimlerChrysler 0.4 per cent.

"Investors decided to book profits on recent positive news from Volkswagen and solid car registration figures," said Guenter Senftleben, an equity strategist at Bankgesellschaft Berlin.

Markus Steinbeis, a fund manager at Activest, said some investors were getting worried ahead of the first public appearance of Fed Chairman Ben Bernanke that a jump in US retail sales will trigger a further hike in US interest rates.

US retail sales surged by 2.3 per cent last month - nearly triple the expected increase and the largest monthly gain since May 2004.

"Markets are concerned that (Fed Chairman Ben) will now paint a too robust picture of the US economy, which will fuel interest rate worries," said Mr Steinbeis.

Mr Bernanke will makes his first public appearance before the House Financial Services Committee. He gives the same report to the Senate Banking Committe tomorrow.

Dealers said a fall in German institute ZEW's German economic expectations indicator to 69.8 this month from last month's 71 also weighed on markets.