European shares were mired yesterday afternoon as investors had second thoughts about extending Monday's rally from late-September lows, despite some steady US economic data.

Munich Re was down 4.4 per cent after broker Deutsche Bank confirmed plans to place 7.6 million shares in the German reinsurer at e205-215.

Financials and banks generally were among the weakest sector, with Britain's Abbey National off 5.5 per cent, still suffering from last week's earnings warning. Credit Suisse Group sank 4.8 per cent.

Oil stocks provided some support amid nervousness over the latest Palestinian suicide bombing in Israel as violence in the oil-producing Middle East continued.

After the prior session's bounce back, worries over profits, economic recovery and political uncertainty returned with a vengeance, sending Wall Street down in early trade too.

At 1349 GMT, the FTSE Eurotop 300 was off 0.9 per cent at 1,090 points, while the narrower Euro Stoxx 50 index had shed 0.6 per cent.

"Stocks are stuck in a hiatus between the performance of corporate profits and the hoped-for economic recovery," said Richard Champion of Pavilion Asset Management in London.

On Wall Street, the Dow Jones industrial average was down 0.2 per cent at 9,664 points, while the tech-studded Nasdaq Composite shed 0.27 per cent.

Investors waited nervously for quarterly earnings from US software giant Oracle after Wall Street's close.

But the market brushed aside economic data which showed tame US inflation and a robust US housing market.