European shares fell yesterday, snapping a three-day rally as investors worried about the economic health of the eurozone's peripheral countries, with banks falling and miners tracking metal prices lower.
The FTSEurofirst 300 index of leading European shares closed down 0.6 per cent at 1,020.99 points after earlier being up as much as 1,031.39.
"The market is very worried, we are stuck in between a rock and a hard place," said Philippe Gijsels, senior equity strategist at Fortis Bank in Brussels.
"On the one hand if we get better economic figures, investors start worrying about rising interest rates, but if you get bad economic figures investors are worrying we could have some sort of a double dip recession."
Investor sentiment was also knocked after traders said Portugal's debt agency IGCP cut its planned T-bill placement to €300 million ($420.3 million) from 500 million.
The news pushed the cost of insuring debt against default for Portugal, Greece and Spain higher.
Across Europe, the FTSE 100 index lost 0.6 per cent, Germany's DAX dropped 0.7 per cent, France's CAC 40 fell 0.5 per cent, Spain's IBEX 35 shed 2.3 per cent and Portugal's PSI 200 fell 2.8 per cent.
Banks featured among the worst performers. Royal Bank of Scotland, Banco Santander, BBVA and BNP Paribas fell 2.1 to 4.2 per cent.
Miners retreated from earlier gains as metal prices fell. Anglo American, Antofagasta, BHP Billiton, Rio Tinto and Xstrata lost 0.8 to three per cent.
Drugmakers were on the decline. Roche slipped 0.6 per cent after it missed full-year profit forecasts due to disappointing sales of key cancer drugs and gave a lacklustre outlook for 2010.
Electrolux, the world's second-biggest home appliances maker, slumped 11.8 per cent after it posted lower-than-expected fourth-quarter profit and forecast only a modest recovery in demand.
Carmakers were in demand. Daimler rose 1.7 per cent on market talk it could release quarterly results that are 50 per cent above consensus ahead of schedule.
On the upside, insurer Standard Life gained 3.5 per cent after the insurer reported above-forecast 2009 sales as a market recovery during the second half helped soften the impact of crisis-hit UK consumers cutting back on savings.
"The positives outweigh the negatives. We expect equity markets to resume their uptrend," said Tammo Greetfeld, equity strategist at UniCredit Group.
"We think the positive economic backdrop is intact. And earnings so far, such as Nokia, and the dividend announcements have been positive. But there are several risk factors, such as Greece's deficit."
In economic news, the pace of US job losses in the private sector slowed in January as employers reported the smallest payroll decline in nearly two years while demand for home loans hit a six-week high last week, data showed.
Meanwhile, the US services sector grew slightly in January, according to an industry report.