European shares were mostly down near nine-month lows late yesterday, despite a technical bounce in beat-up heavyweight financials led by Zurich Financial, in a volatile session littered with option expiries.
Rising concerns in Brazil hit French food retailer Carrefour and Spanish bank Santander Central Hispano while dollar weakness cast a pall over Franco-US media giant Vivendi Universal and the region's car exporters.
Pan-European benchmarks were set to score their fifth straight weekly loss, amid persistent fears that the ongoing global economic recovery will struggle to lift company profits and could even falter.
"We're not seeing any real capitulation just a steady stream of losses, which suggests we haven't seen a bottom yet," said David Thwaites, pan-European equities strategist for BNP Paribas.
By 1548 GMT, the FTSE Eurotop 300 index of pan-European blue chips was 0.35 per cent lower and 1.5 per cent down on the week.
A notable exception was Europe's biggest market London, where the FTSE 100 ended up 0.55 per cent, buoyed by a strong performance from oversold banking stocks.
Not all strategists were despondent. "Cheap valuations and the prospect of an improving earnings base gives a positive outlook for equities over the next six months, and within that we prefer the non-US markets because they offer the better value," said Edwina Neal, global equities' strategist Edwina Neal of Lehman Brothers.
So-called triple-witching expiry of stock index options and futures took place on many European markets and on Wall Street, a quarterly event that can cause high volatility and heavy trade near the start and end of the session.
Zurich Financial, down 21 per cent so far this month due to mounting concerns over the eroding effect on its capital base of falling equity markets, led the blue chip climbers with a technical surge of almost nine per cent.
UK banks Barclays, Lloyds TSB, and Royal Bank of Scotland rose between 2.8 per cent and four per cent each.
But the weak dollar, a warning from Volkswagen that it might not maintain its 2002 car sales target, and bearish comments from Fiat chief Paolo Fresco, kept the auto sector mired.
Germany's Volkswagen eased 3.5 per cent, compatriot and sector leader DaimlerChrysler eased 1.9 per cent, and Italy's Fiat lost 5.5 per cent.
The dollar's slide against the euro to fresh two-year lows also continued to undermine stocks with large exposure to the United States such as Vivendi, which slumped 8.4 per cent.
A weaker dollar makes European exports to the United States less competitive and dents revenues when translated into euros.
The DJ Stoxx technology and telecom sector indices remained at five-year lows.
Shares on Wall Street offered no support. The Dow Jones industrial average shed 1.34 per cent and the tech-laden Nasdaq Composite fell 0.86 per cent.
Brazil was also a focus after a dive in the country's bonds triggered concern it will not be able to roll over its domestic debt ahead of its October presidential elections. Workers Party candidate Luiz Inacio Lula da Silva, feared by investors, is leading in the polls.
"Things are a bit precarious because of the situation in Brazil," said Clive McDonnell, a strategist at Standard & Poor's.
Top European blue chips, like Spanish bank Santander Central Hispano, Spanish telecoms group Telefonica, Dutch bank ABN AMRO and global bank HSBC all have significant exposure to Brazil, McDonnell said.
Shares in all except HSBC were down. French hypermarket giant Carrefour also eased 3.8 per cent due to Brazil, a country which represents about five per cent of its operating profits.
British medical devices group Smith & Nephew leapt 6.9 per cent to 359p after Deutsche Bank raised its rating on the stock to "buy" from "market performer" and set a price target of 400p per share.