European shares fell yesterday after hitting their highest close for eight-and-a-half months in the previous session, as Deutsche Bank led banks lower and BP's results put pressure on energy stocks.
Weak US consumer confidence also weighed on the market and overshadowed news that US single-family home prices rose in May from April, the first monthly rise in nearly three years.
US consumer confidence fell more than expected in July, the Conference Board said, recording its second consecutive decline as sentiment remained hampered by a difficult job market.
The FTSEurofirst 300 index of top European shares closed down one per cent at 902.85 points. Volumes on the index were about 87 per cent of the 90-day daily average.
Across Europe Britain's FTSE 100 shed 1.3 per cent - ending a record-equalling 11th-day winning run, Germany's DAX and France's CAC 40 lost 1.5 and 1.2 per cent, respectively.
Banks were among the worst hit. Deutsche Bank sank over 11 per cent after it raised its loan loss provisions in the second quarter, overshadowing a nearly 70 per cent rise in net profit driven by its investment banks.
BNP Paribas, Credit Suisse, UBS, Royal Bank of Scotland and Deutsche Postbank lost between 2.8 and 5.5 per cent.
However, BBVA advanced 4.5 per cent after reporting its core capital rose to 7.1 per cent in the first half, supporting the bank's recent declarations that it had no need for a capital hike.
"The earnings season seems to be better than analysts' expectations on an aggregate level. So far it seems to be because cost cutting has been very effective... improving profitability despite declines in sales on top line," said Mark Bon, a fund manager at Canada Life.
"There is some expectation that once you have this phase of cost cutting there is a return of some top line growth from refilling the inventory pipeline, an increase in sales," he said, adding that it would be an importance phase for the market to return to healthy earnings growth though it could be a long process.
The FTSEurofirst 300 has gained 40 per cent since reaching a lifetime low in early March, and is up 8.5 per cent for the year.
Oil producers were other standout losers after BP said it had increased its cost reduction targets for 2009 by 50 per cent to $3 billion but reported a halving in second-quarter profits due to lower oil prices and weaker refining margins.