Miners drag European shares lower at close

European shares closed lower yesterday after data showed the US services sector unexpectedly contracted in November, with miners tracking a retreat in gold prices from record highs.

The pan-European FTSEurofirst 300 index of top shares closed 0.2 per cent lower at 1,014.20 points.

"It is a fragile recovery. There are investor concerns that as we move towards 2010 the recovery will not be as we hoped for. There are still difficult times ahead," said Howard Wheeldon, strategist at BGC Partners.

Equities came under pressure after the US services sector contracted, with an index measuring activity falling to its lowest reading since July, according to an industry report.

Across Europe, the FTSE 100 index was down 0.3 per cent, Germany's DAX was 0.2 per cent lower and France's CAC 40 was up 0.1 per cent.

In other economic news, the European Central Bank President Jean-Claude Trichet laid out a number of decisions on ending and tightening up the measures it has taken to support liquidity in the banking sector, as the ECB kept interest rates at a record low of one per cent.

"Given the extent of the downturn in activity and only a modest recovery in growth to date, expectations for significant policy tightening remain premature," said Peter Hensman, global strategist at Newton Investment Management.

Miners took the most points off the index as gold prices fell. Anglo American, Antofagasta, BHP Billiton, Rio Tinto and Xstrata were down between 0.5 and 3.8 per cent.

German industrial conglomerate Siemens slipped 5.2 per cent after it took a big fourth-quarter writedown on its struggling network joint venture with Nokia and warned of lower operating profits and possible restructuring in 2010.

French carmaker PSA Peugeot Citroen fell 2.7 per cent after it said it could buy a large stake in Japanese peer Mitsubishi Motors Corp. as part of a plan to deepen ties to ride out the industry's worst-ever slump.

Banks featured among the top risers after Bank of America Corp. said it would repay $45 billion of taxpayer bailout funds, a move that could free the top US lender from pay curbs as it seeks to hire a new CEO but also makes it more vulnerable to further economic shocks.

"Bank of America paying back its debt is positive," said Bernard McAlinden, investment strategist at NCB Stockbrokers. Banco Santander, Barclays, Credit Suisse and Lloyds Banking Group were up between 0.8 and 4.4 per cent.

Shares in Irish Life & Permanent surged 6.1 per cent on market talk that France's AXA could launch a takeover bid for the bancassurer, traders said, though an industry source said the talk was unfounded.

A spokesman for AXA declined to comment and Irish Life said it never commented on speculation.