European shares edged off their lows yesterday after Federal Reserve Chairman Alan Greenspan warned investors that higher interest rates loomed, but hinted the change would not be as soon as the market feared.
The central banker told a congressional committee the US economy was in a period of vigorous growth, and that borrowing costs must rise at some point from their 1958 low of one per cent.
But inflationary pressures were not building Greenspan added, a comment some analysts took to mean he was in no hurry to raise interest rates.
"Greenspan is still softening the market up for the hint of higher rates to come, but it's being done with a bit of gloved fist," said David Brown, chief European economist at Bear Stearns.
Wall Street began turning higher as Greenspan reassured on inflation, dragging European bourses off their lows.
"It's a more benign hint of higher rates than the market was expecting," Brown said, adding he expected US rates to go up in August.
European shares skidded in early trading yesterday after Greenspan made similar remarks on Tuesday but left investors with the impression that interest rates might rise as early as June.
By 1430 GMT, the FTSE Eurotop 300 index was off 0.6 per cent at 1,015 points, with nearly three issues falling for each one that rose, in good volume.
The benchmark is still only 13 points away from its best levels for the year, underpinned by some strong earnings figures in Europe and the United States.
The narrower DJ Euro Stoxx 50 index dropped 0.5 per cent to 2,862 points.
On Wall Street, the Dow Jones industrial average was flat at 10,302 points. The Nasdaq Composite gained 0.4 per cent to 1,986 points as the tech sector was buoyed by surprisingly strong earnings from cellphone maker Motorola.
There were some bright spots among the gloom. Food group Nestle was up 1.9 per cent at 340 Swiss francs as strong coffee and pet-food sales boosted first quarter underlying sales above what the market expected, with the group also upbeat on 2004 as a whole.
Rival food group Unilever advanced 1.8 per cent to 566-1/2 pence, with the sector overall benefiting from its defensive safe-haven status among investors.
And DaimlerChrysler rose 2.8 per cent to €35.5 as strong earnings and a raised outlook from rival Ford Motor Co. bolstered hopes the US car market was improving.