Banks and insurers knocked European blue chips to a fifth successive loss yesterday as investors worried about high energy costs amid concern the economy is not growing as strongly as expected.
"People are caught between higher energy prices and possible unsustainable growth and if growth is not forthcoming, then the energy prices will put further pressure on the markets," said Ulf Moritzen, fund manager at Nordinvest in Hamburg.
On Wall Street, US stocks traded flat following Wednesday's sharp slide prompted by a spike in oil prices after OPEC unexpectedly said it would trim supplies.
"We need a couple of weeks for people to realise that $27, $28 or $29 per barrel does not really make a difference. Everybody was shocked at the unexpectedness of what happened (the OPEC cut)," Mortizen added.
Among standouts, shares in Pernod Ricard, the world's third-biggest spirits group, rose 2.8 per cent as the group said it expected earnings to grow about 15 per cent this year.
But Dutch insurer ING fell 4.3 per cent after investment bank JP Morgan downgraded the stock to "underweight" from "neutral" while CS Group fell 2.67 per cent, helping the banking sector add most negative weight to main European indices.
By 1604 GMT, with only Germany's DAX still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was down 0.64 per cent at 889 points while the narrower DJ Euro Stoxx 50 index was 0.31 per cent weaker at 2,469 points.
The Dow Jones industrial average was 0.08 per cent higher while the Nasdaq Composite Index rose 0.41 per cent, recoverung from earlier weakness.
After sitting out a dearth of economic data, recovery watchers finally had some numbers to assess but the data did little to clarify views on the economy.
New orders for long-lasting US manufactured goods took a surprise tumble last month as demand for automobiles dropped sharply, while the number of idled workers seeking jobless benefits for the first time fell sharply last week to its lowest level since early February.
European markets have rallied hard since hitting a six-year low in mid-March, but concerns that prices have overshot valuations has seen the rally lose steam.
Germany's DAX outperformed the rest of Europe, gaining 1.53 per cent. London was down 0.81 per cent, Paris was 1.02 per cent weaker and Zurich was off 1.34 per cent.
"Yesterday the (German) market was hammered hard and today it is picking up again. You can see that with Metro which is climbing seven per cent after falling sharply,"said M.M. Warburg trader Oliver Hauer.
Europe's biggest retailer Metro more than recouped Wednesday's fall, jumping as much as 7.33 per cent while Deutsche Post rose over four per cent.
"There are a lot of people with cash waiting on the sidelines and the market has gained speed after it passed the 3,300 points level," Hauer added.
Energy firms rose along with the oil price following oil cartel OPEC's surprise production cut on Wednesday.
BP was 0.83 per cent firmer, Royal Dutch and Shell were 0.89 per cent stronger.
Heavyweight German insurer Allianz was a positive influence, up 3.04 per cent after JP Morgan raised the stock to "overweight" from "neutral".
Also in the financial services industry, Dutch-Belgian firm Fortis rose 2.4 per cent after announcing plans to spin off its US insurance operations in an initial public offering next year.
British glass maker Pilkington shone, gaining 5.66 per cent after it said its first-half profits would rise about 10 per cent.