European shares ended lower yesterday after staying in positive territory during most of the day, with investors selling stocks, following data showing the US services sector contracted more than expected in July.
The FTSEurofirst 300 index of top European shares closed 0.6 per cent lower at 934.47 points, hovering in a wide range of 931.11 to 946.70 points, after hitting a nine-month high on Monday.
Stronger-than-feared corporate earnings have helped the FTSEurofirst 300 to climb about 15 per cent since July 10. The index is now up 45 per cent since its lifetime low in March, but is still down 43 per cent from its multi-year peak in mid-2007.
Across Europe, the UK's FTSE 100 index, Germany's DAX and France's CAC 40 were down 0.5-1.2 per cent.
Energy stocks were among top decliners, also under pressure because of weaker crude prices. BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol, Total and StatoilHydro shed between 0.8 per cent and 3.9 per cent.
"Whether you're cautious or cautiously optimistic of a sustained recovery ... there is a sense that after the recent strong climb to the current plateau, now is the time to take a completely justified breather at this check-point before ideally pressing on to new heights," said Anthony Grech, strategist at IG Index.
Miners also lost ground. BHP Billiton, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources fell 0.7-1.9 per cent.
The stock market slipped after data showed the Institute for Supply Management's services index fell to 46.4 last month from 47.0 in June, below economists' forecast for a rise to 48.0. The dividing line between growth and contraction is 50.
News that US private employers axed more jobs in July also dampened sentiment and overshadowed figures showing that new orders received by US factories unexpectedly rose in June.
"In the very short term, it would be understandable if we went through a period of calm after a tremendous rally," said Henk Potts, equity strategist at Barclays Stockbrokers.
"But in the longer term, I see equity markets rising further from the current levels. The second-quarter reporting season has gone very well and analysts have been increasing their forecasts," he added. According to Thomson Reuters data, so far 146 companies in the DJ STOXX 600 have reported their quarterly results in the current earnings season, of which 75 beat estimates, two matched and 69 missed the estimates.
On the positive side, shares in Société Générale jumped six per cent after it posted a smaller-than-expected drop in second-quarter profits, helped by a surprisingly small bad debt provisions and an investment banking recovery.
AXA gained 1.7 per cent after Europe's second largest insurer by market value posted a smaller-than-expected drop in half-year earnings.
Lloyds Banking Group jumped 10.6 per cent after it fanned hopes for an imminent end to Britain's UK real estate debt drought. It said that impairments in its multi-billion pound commercial mortgage book had peaked.
Other banks also advanced, with Standard Chartered, Barclays, Royal Bank of Scotland, UBS and Commerzbank gaining 1.1-4.4 per cent.
Shares in German stock and derivatives market operator Deutsche Boerse fell more than six per cent after the exchange published disappointing second-quarter figures late on Tuesday night.