European shares ended lower yesterday, despite a reassuring US inflation report, as investors sold energy and mining shares, while Novartis was hit after one of its drugs failed to get experts' backing.
There was strength in Philips as news the Dutch conglomerate is turning its semiconductor unit into a separate legal entity raised hopes it would quit the highly cyclical business, while French retailer Carrefour gained 1.9 per cent after Deutsche Bank added the stock to its focus list.
The rally that lifted European stock indexes more than eight per cent in the past six weeks seemed to run out of steam as investors turn their eyes to 2006, where fundamentals seem a little weaker.
By 1640 GMT the pan-European FTSEurofirst 300 index was 0.34 per cent lower at 1,258.8 points, 0.5 per cent below a multi-year peak of 1,265.18 points set on Monday but still showing gains of 21 per cent since the start of 2005.
A report showing a 0.6-per cent dip in US consumer prices in November did little to support sentiment as investors now seemed more concerned by the risk that less accomodative monetary conditions are starting to squeeze consumer spending, the kingpin of the world's biggest economy.
"Consumers in the United States are facing significant headwinds from higher interest rates, rising energy prices, increased medical costs pushed back on them by employers, and shrinking real wage rates," said economist David Rosenberg at Merrill Lynch.
Mr Rosenberg said an expected slowdown in consumption had major implications for the global economy.
"The US consumer is roughly 20 per cent of the global economy. Although many observers discuss the growth in Asian domestic demand, Asian consumer economies are not yet mature enough to offset a significant slowdown in US consumption.
Such worries, coupled with a desire by many market players to close their books now so as not to jeopardise 2005's gains, will likely dull the performance of equity markets in the final two weeks of the year, observers said.
Around Europe, London's FTSE 100 index shed 0.5 per cent, while Paris's CAC 40 inched 0.04 per cent lower and Frankfurt's DAX gained 0.2 per cent. The Swiss Market Index was down 0.8 per cent in Zurich.
Weighing on London's blue-chip index were mining stocks such as Rio Tinto, pressured by lower copper and gold prices, while a dip in oil prices hit energy stocks such as BP.
Other decliners included Degussa, down 2.6 per cent after the European Commission opened an in-depth investigation into privately held US firm Cargill's plans to buy the German specialty chemical group's food ingredients business.
In the drugs sector, Novartis shares fell 1.2 per cent as a panel of experts decided not to recommend the Swiss group's Zelnorm drug for irritable bowel syndrome in the European Union, a decision that blocks EU approval for the drug.