European shares end down, snapping three-day winning run

European shares fell yesterday, snapping a three-day winning streak, as softer commodity prices weighed on energy and mining stocks, though demand for pharmaceuticals offered support. The FTSEurofirst 300 index of top European companies closed down 0.2 per cent at 885.75 points, after hitting its highest closing level in five months last Thursday. It has gained 1.5 per cent this week. Volumes on the pan-European index were about 75 per cent of its 90-day average daily volume.

Oil producers were among the leading losers as crude prices slipped. BP, Royal Dutch Shell, Total and Repsol lost between 0.9 and 2.1 per cent. Weaker metals prices hurt miners, with BHP Billiton, Antofagasta, Vedanta Resources, Rio Tinto, Kazakhmys and Fresnillo down 1.3 per cent to 8.5 per cent.

Banks were mixed. Barclays, Credit Suisse, Deutsche Bank and Lloyds Banking Group dropped between 0.7 and 4.1 per cent.

Société Générale and BNP Paribas rose.

Stephen Pope, chief global market strategist at Cantor Fitzgerald, said the market could move higher as he expected fund managers who have mostly been sitting on their hands would put their cash to use in coming months.

"Now that we have gone through the 200-day moving average (on the chart) and we are holding on, and we are only few weeks away from the end of the half year, there will be a lot of fund managers thinking, 'My goodness, we are still in cash, and we are not earning anything'," Mr Pope said.

"I do believe there is going to be this push of money that comes in to start the beginning of the third quarter."

Across Europe, Britain's FTSE 100 slipped 0.5 per cent, Germany's DAX lost 0.7 per cent and France's CAC-40 eased 0.3 per cent.

Data showed that eurozone industrial production shrank by more than a fifth in April compared with a year earlier - a new record - raising risks that second quarter GDP will be weaker than expected.

In the US, consumer confidence rose to a nine-month high in June but failed again to surpass its level in September 2008, when the spectacular failure of Lehman Brothers sent the world economy into a tailspin, the Reuters/University of Michigan Surveys of Consumers said.

"We believe that the 35 per cent rise in European equities since March 9 was a move to price out the 'fat tail' probability of a 1930s/1990s Japan scenario," UBS said in a note. "To move higher from here, we think equity markets need to see a recovery in earnings in 2010."

The broker forecast 15 per cent growth in European corporate earnings in 2010 after declining 25 per cent this year.

Drugmakers were in demand yesterday, lifted by news that the World Health Organisation declared an influenza pandemic.

Novartis, Sanofi-Aventis, GlaxoSmithKline and AstraZeneca were up 3 per cent to 5.4 per cent.

Telecoms, another defensive sector, were also firmer. Deutsche Telecom added 1.2 per cent, Cable & Wireless advanced 1.3 per cent, and Telefonica tacked on 0.5 per cent.