European shares end lower, rate cuts fail to cheer

European shares ended lower yesterday as a slew of grim economic and company news flagged tough times ahead after steep rate cuts by the European Central Bank, the Bank of England and Sweden's Riksbank.

The FTSEurofirst 300 index closed 0.4 per cent lower at 826.71 points in choppy trade, after rising as much as 2.6 per cent and falling as much as 1.8 per cent. The index is down 45 per cent so far this year.

Miners were one of the top losers on the index, tracking lower metal prices. BHP Billiton, Anglo American, Lonmin, Xstrata, Antofagasta and Rio Tinto fell between 0.2 and 8.8 per cent.

Among other significant decliners, Swedbank fell 8.8 per cent, EDF lost 7.2 per cent, GDF Suez declined 4.7 per cent and Old Mutual lost six per cent.

"We are not in a normal environment. We are facing the most severe recession since the 1930s. Once confidence is broken it takes a lot of time and a lot of interest rate cuts to get back," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.

The European Central Bank cut its rate by 0.75 percentage points to 2.50 per cent, the eurozone's biggest ever cut, while Sweden lopped a record 1.75 percentage points off its policy rate to two per cent and the Bank of England chopped 1 percentage point off its base rate to bring it to two per cent, the lowest level since 1951.

Many analysts applauded the large rate cuts throughout Europe but market reaction indicated that even more sweeping moves may be needed to halt the worldwide economic slowdown.

"It's very welcome, and I think there's much more in the pipeline, and that's good news for equity markets, but meanwhile the grim reminder of poor economic numbers will be with us for many more months," said Mike Lenhoff, chief strategist at Brewin Dolphin.

Negative economic and labour news continued to rattle investors. With the United States, Europe and Japan in recession, data showed a mounting pattern of job losses and corporate woes across the globe.

The number of US workers on jobless benefit rolls hit a 26-year high last month and investors are expected to witness another sharp fall in US employment. US factory orders fell 5.1 per cent in October.

Falling investment and a weaker trade performance made the euro zone economy contract in the third quarter, data showed.

Across Europe, the FTSE 100 index was 0.2 per cent lower, Germany's DAX fell 0.07 per cent and France's CAC 40 was 0.2 per cent lower.

France yesterday unveiled a €26 billion stimulus plan for its faltering economy as unemployment rose, the latest European country to open state coffers to fight the downturn.

Credit Suisse shares jumped 10 per cent after it announced big job cuts, further evidence the global financial crisis is unrelenting for an industry battered by heavy losses.

The 5,300 layoffs by the Swiss bank is the latest in the global financial sector which has seen 150,000 job cuts since September when Lehman Brothers filed for bankruptcy.