Pharmaceuticals, oils drag down European shares

European shares closed lower yesterday, dragged down by oil stocks tracking a fall in crude prices on economic recovery concerns and the drugmaking sector.

The pan-European FTSEurofirst 300 index of top shares closed down 0.6 per cent at 1,008.88 points after trading as high as 1,027.89 points earlier in the day.

The index, which fell 45 per cent in 2008, is up 21 per cent this year and has gained almost 56 per cent from a record low hit in March.

"We are back to a situation where the markets have rallied quite strongly.

We have had a interesting week of both good and bad news. I just think this is profit taking," said Howard Wheeldon, strategist at BGC Partners.

Oil stocks reversed early gains as crude fell 0.6 per cent after scepticism that the economic recovery was robust enough to spur a convincing rise in fuel demand quelled the appetite to extend this week's powerful rally.

Galp Energia, Petroplus, Royal Dutch Shell and Total were down 0.4 to 1.6 per cent.

Drugmakers featured among the worst performers. Elan slumped 20 per cent after European regulators said they have begun a review of the multiple sclerosis drug Tysabri following reports of 23 cases of a potentially deadly brain infection.

GlaxoSmithKline, Roche and Merck were down 0.6 to 1.1 per cent.

On the upside, miners were the top performers tracking metal prices higher, with copper up 0.5 per cent.

Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata gained 1.5 to 4.2 per cent.

Banks were in demand. HSBC, BNP Paribas, Standard Chartered and Societe Generale were 1.2 to 2.2 per cent higher.

Some analysts have noted that in the past two weeks, barring one exception, the index has followed a pattern by rising one day and falling in the next. They said the behaviour showed that investors were cautious in trading.

"That's a clear sign that the positive momentum is losing steam and there is a real risk of a pull back, especially after a rally of 60 per cent," said Koen De Leus, economist at KBC Securities.

"Getting into the market now looks to me pretty risky. If you go into the market now, see that you have something to fall back on, like stop-loss orders. See that you have your parachute ready," he added.

Across Europe, the FTSE 100 index was up 0.7 per cent, Germany's DAX was down 0.4 per cent and France's CAC 40 was 0.3 per cent lower.