European stocks end down as rates held

European shares ended slightly lower yesterday, weighed down by financials after the region's top two central banks kept rates on hold as expected and investors saw little to suggest eurozone borrowing costs would fall soon.

But mining stocks rallied sharply on fresh talk of consolidation in the sector, limiting losses on the pan-European FTSEurofirst 300 benchmark, which ended down 0.1 per cent at 1,360.88 points.

Banks took the most points of the index, tracking US peers that fell after regulators urged increased government oversight of investment banks.

Swiss bank UBS fell 5.1 per cent, while Société Générale and Barclays slipped 2.5 per cent.

Austrian bank Raiffeisen tumbled 7.8 per cent to top European losers after its first-quarter earnings disappointed investors.

Earlier, the Bank of England kept rates at five per cent and the European Central Bank stayed at four per cent, as expected.

ECB President Jean-Claude Trichet said that the bank's current policy stance would help it achieve price stability, although inflation was likely to remain high for some time amid turbulent markets.

"The ECB will need to see more of a slowdown in the economy for the next months before it lowers rates, and we expect this to happen in the third quarter," said Thierry Lacraz, strategist at Swiss bank Pictet.

"The main factor behind this is the development of the oil price, and the bank will have to decide whether ... to have a tough policy to fight inflation that is not due to internal factors such as wages," he said.

Among other losers in Europe were Inbev, which lost 5.9 per cent after the world's second biggest brewer posted below-forecast first-quarter results.

Across Europe, Britain's FTSE ended up 0.2 per cent, while Germany's DAX lost 0.1 per cent and France's CAC lost 0.4 per cent.

Miners were the strongest sector, with the DJ Stoxx European Basic Resources index gaining 1.9 per cent, powered by Kazakhmys, which soared 10 per cent on renewed speculation of a bid from ENRC, which declined comment.

Platinum specialist Lonmin gained 6.1 per cent despite withdrawing a long-term output target, and Antofagasta gained 5.5 per cent, helped by a legal settlement over a dam in Chile.

Unilever also provided a bright spot. The maker of Dove soap and Knorr soups rose 5.4 per cent after its first-quarter sales topped forecasts and it said annual sales would beat its targets.

Other prominent risers included Denmark's Vestas Wind Systems, which jumped 12 per cent to top European gainers after it said it could charge higher prices and run operations more effectively.

European stocks have risen 1.6 per cent so far in May after a six per cent jump last month that made April the best month since late 2003.

But analysts have termed the gains a bear-market rally, and some are sceptical it will last. The FTSEurofirst is down 10 per cent this year and 17 per cent from a six-and-ahalf-year peak hit in July last year.