European shares fell yesterday as a surge in US inflation prompted investors to take cash off the table after the market's rapid climb to 28-month highs.

Other factors weighing on the market included HSBC which fell on news of poor results at the global bank's US operation Household International. The stock, which hit a three-year high on Monday, fell 2.8 per cent to 926-1/2 pence.

Autos were also among the hardest hit as European consumers bought fewer cars last month, while French engineering firm Alstom sank 7.8 per cent, down for a second day in heavy trading ahead of its earnings tomorrow.

And plans by Vodafone Group to hand £6.0 billion back to shareholders failed to inspire investors in the world's biggest mobile phone company by revenue.

Vodafone fell 0.5 per cent to 142 pence as analysts said the payout had been widely anticipated.

The FTSEurofirst 300 index ended off 0.6 per cent at 1,027.18 points in good volume as the pan-European blue-chip index distanced itself from Monday's 28-month high.

The selling gathered pace after news that US producer prices shot up 1.7 per cent in October, the biggest rise in nearly 15 years as energy costs skyrocketed and food prices surged.