European stocks end down as banks, resources drag

European stocks ended yesterday on a negative note, dragged down by resources and by banks as the battle for ABN AMRO rumbled on, while a handful of upbeat earnings helped stem the slide.

Among major movers, Scania rallied after beating its earnings forecasts while Scottish & Newcastle and Deutsche Post rose amid ongoing merger speculation.

"We might get market blips and corrections, but overall, the undertone of the market is quite strong, I'd be buying on dips at the moment," said Richard Robinson, fund manager at Ashburton in Jersey.

"Liquidity continues to drive the markets."

The FTSEurofirst 300 index of top European shares ended down 0.6 per cent at 1,567.7 points, after touching its highest level in more than six years on Thursday.

The index closed up around 0.8 per cent for the week.

Britain's FTSE 100 slipped 0.8 per cent, while Germany's DAX dipped 0.1 per cent and France's CAC 40 fell 0.2 per cent.

European stocks extended losses in the wake of US data showing growth in the world's biggest economy slowed to its softest rate in four years in the first quarter, with gross domestic product at 1.3 per cent.

The closely watched Reuters/University of Michigan Surveys of Consumers showed US consumer sentiment fell in April to its lowest in seven months but was better than first estimated.

"A combination of weak growth and strong inflation is a negative signal for investor risk sentiment," said Lena Komileva, G7 economist at Tullett Prebon.

Banks continued to dominate market attention, with Royal Bank of Scotland down 1.5 per cent as its consortium prepared the way for a hostile bid for ABN AMRO, formally notifying the Dutch bank of plans to make an offer.

Consortium member Santander fell 2.4 per cent and Fortis lost 1.7 per cent, while ABN added 1.2 per cent.

Barclays, which has an agreed €65 billion deal on the table, added one per cent, as investors speculated it could become a takeover target itself if its bid for ABN failed.

Resource stocks weighed on the downside, with BP down 1.7 per cent and Royal Dutch Shell 1.3 per cent lower as Brent crude traded below $68 a barrel.

Miners also slid, with BHP Billiton down 1.8 per cent and Rio Tinto 0.8 per cent lower after copper prices took a dip before clawing back some losses.

Among companies reporting earnings, Swedish truckmaker Scania, which this year escaped a hostile bid from German rival MAN, rose 4.8 per cent after posting results ahead of expectations and forecasting strong demand.

Friends Provident fell 1.6 per cent after meeting sales forecasts but warning that headwinds in one of its key markets were getting stronger, while chipmaker Infineon shed 2.3 per cent after it missed expectations.

Brewer Scottish & Newcastle rose 6.8 per cent on talk it might be a target of Carlsberg, after the Danish company unveiled plans to change its share structure to gear it up for acquisitions.