European shares end mixed

European stocks closed mixed yesterday, with UK markets underperforming as rising inflation stoked worries of an interest rate increase and hit banks.

Telecom Italia dipped as much as 4.3 per cent on the day after AT&T pulled out of talks to acquire control of the company but ended little changed. The pan-European FTSEurofirst 300 index managed to eke out yet another six-year closing high at 1,572.7, up 0.06 per cent, but closed below an intra-day high of 1,574.8. Global equities have now recovered from a sell-off in late February and early March.

The European index is up six per cent so far this year on a jump in mergers and acquisitions, adding to last year's 16 per cent rise.

Stocks got a boost after US data in the session showed tamer March core consumer prices and eased interest rate worries. The Dow Jones industrial average was within striking distance of a record, also supported by solid corporate earnings.

"Probably markets will be very satisfied if the US economy continues to grow without any upward move from the Fed," said Thierry Lacraz, strategist at Swiss private bank Pictet & Cie.

"People don't seem to have the feeling that the economic situation is worsening, so it is probably good news."

Across European markets, the UK's FTSE 100 index fell 0.3 per cent and underperformed German and French exchanges as a surprise surge in UK inflation stoked expectations of at least one more increase in interest rates, expected next month. The sterling breached the $2 level for the first time in almost 15 years, while the euro was at a two-year high versus the dollar.

UK banks were among the biggest contributors to the weakness in European markets, with HBOS down 1.1 per cent, RBS lost 0.8 per cent and HSBC shed 0.6 per cent.

Among standout gainers, Dutch bank ABN AMRO gained 2.3 per cent to a record high at €36.4 with sources saying the bank is pushing for a bid above €35 a share from UK's Barclays. The two banks extended the deadline for exclusive takeover talks by a few days to April 20.

Across Europe, Germany's 30 share DAX rose nearly 0.2 per cent and France's CAC 40 slipped 0.1 per cent.

"In sum, while we believe slowing economic and earnings growth presents some risks for equities, we do not believe it spells the end of the bull market," Bob Doll, global chief investment officer, equities, at money management firm BlackRock said in a note.

"Slower, but still sustainable levels of growth, combined with good valuation levels and less restrictive (if not yet accommodating) monetary policy, should create a constructive backdrop for stocks over the long term."

Among standout gainers, shares in Tesco rose 1.3 per cent after Britain's biggest retailer doubled the amount of cash it plans to return to shareholders to three billion pounds and reported results in line with market estimates.

Adidas rose 2.7 per cent to €45.1 on bid talk in the market, traders said. Some traders said private equity group Apax was likely to bid €50 per share for the German sporting goods maker. Apax declined comment.