European stocks close lower, drugmakers, oil prices fall

European shares closed lower yesterday, with drugmakers and oils falling, after unemployment and services sector from the United States provided further evidence of recession.

The pan-European FTSEurofirst 300 index of top shares fell 1.3 per cent to close at 771.60 points. The index rose 4.6 per cent over the week, and is up 19.5 per cent from its lifetime low of March 9.

Across Europe, the FTSE 100 index fell 2.3 per cent, Germany's DAX rose 0.1 per cent and France's CAC 40 fell 1.1 per cent.

The US economy lost 663,000 jobs last month, government data showed, compared with Reuters forecasts of 650,000. The unemployment rate is now 8.5 per cent, in line with forecasts. "After the euphoria of the G20, some economic reality has kicked in," said Philip Lawlor, chief portfolio strategist at Nomura, in London.

"We had a good run and some people have decided to lock profits in.

"The numbers weren't a huge shock, with the ADP data having given us a good steer on Wednesday," said David Evans, market analyst at BetOnMarkets.com.

There was worse news to come. Business activity in the US services sector shrank for a sixth straight month in March, compared with economists' forecasts for a rise.

As European bourses were closing, the Dow Jones, S&P 500 and Nasdaq Composite were down between 0.4 per cent and 0.7 per cent.

European drugmakers were among the biggest losers.

Novo Nordisk fell 13.7 per cent after a US advisory panel failed to back its experimental diabetes drug Victoza, or liraglutide, with votes split on whether it was safe enough to come to the market due to worries over cancer.

AstraZeneca, GlaxoSmithKline, Sanofi-Aventis, Novartis and Roche were down between 2.4 per cent and 4.6 per cent.

The oil sector also retreated with crude prices down nearly three per cent at just over $51 a barrel.

BP, BG Group, Total, ENI, and Statoil fell 2.3 per cent and four per cent.

Carmakers Daimler, Peugeot and Renault were among the biggest risers, up between 6.1 per cent and 10.5 per cent, after Credit Suisse upgraded the sector to overweight from market weight.

Royal Bank of Scotland added 8.5 per cent after the group said it would cut more jobs and promised a "return to paying dividends as soon as practicable".

The FTSEurofirst 300 rose 4.9 per cent on Thursday after world leaders agreed to pump $1.1 trillion deal into the global economy through extra funding for groups like the IMF.

The index is down 7.3 per cent in 2009, after falling 45 per cent last year, battered by a banking crisis that helped to tip several major economies into recession. "There are some green shoots but we're not out of the woods yet," said Nomura's Mr Lawlor.

Meanwhile the only sector in the US to add employment was education and health care, up 8,000, while government employment fell by 5,000. The average work week contracted to 33.2 hours from 33.3 hours, which analysts said could mean lower production and income, hurting the economy.

The US economy contracted at a steep 6.3 per cent pace in the fourth quarter as the recession deepened. The government will estimate first-quarter gross domestic product later this month.

Julia Coronado, economist at Barclays Capital, called yesterday's report "uniformly weak, with sizable job losses across all sectors".

Ms Coronado is forecasting a 5.5 per cent drop in US output in the first quarter of 2009. But she said the latest data shows an 8.7 per cent quarterly drop in total hours worked, which she said offers a good proxy for economic output.