Disappointing earnings by Dutch insurer Aegon and European aerospace giant EADS, as well as worries over the impact of oil prices at 13-year highs, led European shares to a lower close yesterday.

Technology issues were a sore spot, with French telecoms equipment maker Alcatel and Dutch chip equipment firm ASML off about four per cent each, after a mixed earnings report from industry bellwether Cisco Systems.

There was better earnings news from Franco-Spanish tobacco group Altadis, which posted slightly higher first-quarter core earnings and forecast significant profit growth this year. Its shares added 3.4 per cent in Madrid.

Vestas, the world's leading wind turbine maker, was another bright spot, up six per cent after the US Senate passed a key piece of energy legislation that would extend tax credits to firms that produce electricity from renewable energy sources.

But concern that soaring oil prices could hurt economic growth - by eating into companies' margins and consumers' spending power - kept sentiment in check. This forced the FTSE Eurotop 300 index of pan European blue chips to end off 1.1 per cent at 969 points, its lowest close since March 25.

Investors also worried that the inflation fostered by higher crude prices may push central banks to raise borrowing costs sooner and more abruptly than anticipated, putting additional skids on consumption and economic growth.

"Although inflation remains low, markets are fretting about higher oil prices," said ABN AMRO economist Matthew Wickens.

Oil prices burst to new 13-year highs above $40 a barrel yesterday on concern that producer cartel Opec may not pump enough crude to meet rapidly accelerating world oil demand.

"A pick-up in inflation, higher interest rates, fading profits growth and a possible re-run of the 1994 bond market crash suggest a more defensive asset allocation is required," said Mr Wickens, who trimmed his stance on equities to "neutral" from "overweight" and recommended cash instead.

Investors looked ahead to the publication of US data on retail sales and producer prices today, and tomorrow's consumer prices report, for clues on the timing and scope of an interest rate hike by the Federal Reserve.

The DJ Euro Stoxx 50 index fell 1.6 per cent to 2,678 points, as Frankfurt's DAX and Paris's CAC shed 1.9 per cent and 1.2 per cent respectively.

In London, the FTSE 100 ended 0.9 per cent lower, while over in New York, the Dow Jones industrial average and the tech-studded Nasdaq Composite had lost 1.1 per cent and 2.2 per cent, respectively, by 1545 GMT.