European shares pared losses yesterday afternoon, bolstered by solid earnings at retailer Metro and Wall Street's opening gains, but gnawing security and economic worries kept sentiment fragile.
The FTSE Eurotop 300 index of pan-European blue chips was 0.1 per cent lower at 961.6 points by 1445 GMT.
The benchmark index had slipped to 954.20 points after New York police said a suspicious truck parked illegally in midtown Manhattan yesterday prompted authorities to evacuate the street around it, although it was found not to be a threat.
Traders said investors, wary of new security concerns in the wake of March 11's Madrid bombings, had been partially soothed by news from Palestinian militant group Hamas yesterday that it had no intention of attacks targetting the United States, Israel's chief ally.
"Investors are very nervous about any geopolitical news that heightens security risks. It triggers immediate selling," said Akber Khan, of the European equities desk at Deutsche Bank.
"Markets will only start to recover if we have a substantial period without security alerts and we see excessive good news on corporate earnings, such as that from Metro this morning, or strong economic data."
Doubts over the sustainability of the economic recovery added to negative sentiment after a US economic report showed that new orders for long-lasting factory goods rose more than forecast in February due to strong aircraft demand, but that the number declined when transportation was stripped out.
Strategists said that only a surprisingly strong US non-farm payrolls figure next week could convince markets that the current recovery slowdown was temporary.
"Investors realise that personal tax cuts will no longer finance rapid disposable income growth in the second half of 2004. Hence, if payrolls fail to pick up, consumption is likely to fall and so too will the equity markets," said Dresdner Kleinwort Wasserstein strategist Albert Edwards.
The narrower DJ Euro Stoxx 50 index dropped 0.3 per cent to 2,707 points and Paris's CAC was off 0.4 per cent, but Frankfurt's DAX added 0.1 per cent and Zurich's SMI was 0.4 per cent firmer.
London's FTSE was unchanged, while on Wall Street, the Dow Jones industrial average opened up 0.1 per cent, at 10,073, while the tech-laced Nasdaq Composite Index ticked up 0.4 per cent, to 1,908.
Metro, the world's fourth-biggest retailer by sales, rose 3.9 per cent after posting a 13.1 per cent rise in 2003 earnings. The group said it expected to see robust growth in both profits and sales this year.