European stocks gave back some of their early gains yesterday afternoon as Anglo-Dutch consumer goods group Unilever was hit after posting flat sales, while a weak opening on Wall Street also weighed on sentiment.

But strategists said positive sentiment will continue to dominate equity markets as economic data and earnings reports show signs of stronger growth.

"Market sentiment is still bullish," said Francois Lemoine, European equity strategist at BNP Paribas. "We are getting confirmation that the global economy is recovering... Earnings are recovering quite sharply in the US."

By 1445 GMT, the FTSE Eurotop 300 index, an index of pan-European blue chips, was up 0.1 per cent at 913 points, down from the session high of 919.32 in the run-up to Wall Street's open.

In New York, the Dow Jones industrial average inched 0.05 per cent lower to 9,741 points while the tech-heavy Nasdaq Composite shed 0.2 per cent to 1,928, both giving back some of Tuesday's gains after the Federal Reserve left US interest rates at 45-year lows of one per cent.

Shares in Unilever shed 1.9 per cent as investors chose to shrug off an 11-per cent rise in third-quarter earnings and higher margins to focus on stagnating revenues, a week after the group issued its second sales warning for the year.

The chemical sector was hit by an eight per cent slide in the British industrial gas firm BOC after a US jury ruled against it in a lawsuit linking welding fumes to Parkinson's disease. BOC said it would appeal.

Sentiment in the chemical and auto sectors was dampened by euro gains against the dollar, as the fresh rise in the European single currency fuelled fears it would make European exporters less competitive.

Europe's biggest carmaker Volkswagen fell 2.8 per cent after it said the cost of revamping its Brazilian operations and the strength of the euro would probably halve profits this year.

Another decliner was Nordic telecoms firm TeliaSonera, off 3.8 per cent to 35.60 Swedish crowns on a slowdown in sales despite third-quarter core earnings above expectations.

But shares in HVB, Germany's third-largest bank, were up 5.6 per cent at a 14-month high of €18.44 as the bank returned to profit in the third quarter after four straight quarters in the red, thanks to proceeds from the sale of its consumer finance unit.