European shares closed lower yesterday, off a one-week high on worries a move by China's central bank to restrain credit could stifle one of the main engines of world economic growth.
Mining companies, which are among the biggest beneficiaries of China's buoyant economy, saw their shares tumble, with BHP Billiton off 2.2 per cent.
Technology stocks also weighed on the market as Ericsson and others fell in step with the Nasdaq. That index was down 0.8 per cent around midday in New York.
The pan-European FTSEurofirst index of 300 leading shares ended down 0.6 per cent at 1,260.46 points, putting its losses for the week at 1.2 per cent.
It was the FTSEurofirst's third consecutive week of losses, leaving the benchmark index down 1.2 per cent for this year.
News that China had moved to curb credit growth by imposing new limits on the amount of money commercial banks can lend took the shine off a market that had found comfort in comments from Federal Reserve Chairman Ben Bernanke on inflation.
It was also helped by data showing an unexpected improvement in US consumer sentiment early this month.
Some observers said equity investors were reacting too harshly to the Chinese announcement.
"We've known for some time that China is pursuing a policy of restraint with regards to monetary expansion. I would be inclined to view this as another step in that general process and one that equity markets shouldn't react too negatively to," said Darren Winder, strategist at investment bank UBS.
"Equity markets are taking quite a pessimistic view of the outlook for profitability. The global economy is slowing down, I think we all recognize that, and will continue to slow going forward. This is more than adequately reflected in valuations."
Investors now hoped European equities would claw back from recent lows next week, but economic data is likely to once again hold the key to any rebound. Investors are looking for clues on the direction of global interest rates from US and euro zone inflation data, alongside the ZEW investor sentiment survey.
Yesterday, London's FTSE 100 index and the Swiss Market Index both shed 0.4 per cent, while Paris's CAC 40 fell 0.6 per cent and Frankfurt's DAX was off 0.9 per cent.
Austria's ATX index bucked the trend, rallying two per cent as traders raced to catch up with two straight days of gains in Europe and Wall Street as Vienna's bourse reopened after Thursday's public holiday.
There were others pockets of strength in Europe. Scottish Power rallied 3.9 per cent after an upbeat presentation that sparked a positive research note from Morgan Stanley. Software maker SAP added one per cent after US rival Oracle's upbeat earnings forecast.
Reality TV production company Endemol jumped nine per cent as a source familiar with the situation said Dutch media mogul John de Mol may team up with Mediaset to buy back the company he co-founded.
But EADS closed 0.5 per cent lower as the French boss of the Airbus parent came under new fire as French and German regulators announced share-trading probes just two days after delays to the plane-maker's A380 flagship stung its stock.