European shares ended lower yesterday, snapping a three-day winning streak, as banking stocks, weakened by mounting concerns about a deep recession, outweighed positive energy stocks that tracked stronger crude prices.
The FTSEurofirst 300 index of top European shares closed 0.7 per cent lower at 853.81 points. It has lost more than 43 per cent this year, battered by the credit crisis, which has helped push several major economies into recession.
"There is still too much uncertainty. It's too early to say, but we may be finding a bottom here. If we get some stability, that would be nice," said Edmund Shing, strategist at BNP Paribas, in Paris.
"People are looking for direction. The good news is that the market is not going down on the back of bad economic news."
Banks took most points off the index, with HBOS falling 2.6 per cent, Royal Bank of Scotland down 3.5 per cent, Lloyds TSB falling 5.5 per cent and Commerzbank down 2.4 per cent. But some analysts said the market remained cautious as poor economic data continued to pour in. The number of US workers filing new claims for jobless benefits surged to a 26-year high last week as employers tightened their belts to help weather what many fear will be a long and deep recession.
Separate reports showed the US trade deficit swelled unexpectedly in October as weak economies around the world imported less from the United States, while US import prices registered a record decline last month.
The outlook for Britain's economy darkened with news of a sharp contraction in manufacturing and construction orders, plunging price expectations and dire warnings from retailers pointing to a long and painful recession ahead.
Across Europe, the FTSE 100 index was up 0.5 per cent, the German DAX index was down 0.8 per cent and France's CAC index was down 0.4 per cent.
Energy shares rallied with a 10 per cent jump in crude after the International Energy Agency predicted global growth in crude demand would resume in 2009. BP, BG Group, Royal Dutch Shell and Tullow Oil rose 2.7-20 per cent.
Miners were mixed, with Lonmin, Kazakhmys and Xstrata rising 1.2-7.5 per cent. But BHP Billiton, Anglo American, Vedanta Resources, Antofagasta and Rio Tinto fell 0.1-4.1 per cent.
"The commodities sectors are making sense, from the point of view of valuations, with miners down to four times (earnings) and oils down to six," said Philip Isherwood, strategist at Dresdner Kleinwort.
"The problem with the policy initiatives is that the response is proportionate to the economic problems. You're getting a lot because you've got a lot of problems," said Philip Isherwood, strategist at Dresdner Kleinwort. Cracks emerged in the global effort to drag the world out of recession with Germany attacking Britain ahead of an EU summit for rushing into debt to bail out industries and pump up growth. A proposed US auto industry bailout also headed for a clash, in the US Senate where there is a Republican opposition.