European shares ended slightly higher after choppy trade yesterday, as strength in retailers on impressive quarterly results from Tesco outweighed the impact of shaky financial stocks.
The FTSEurofirst 300 of top European shares closed 0.2 per cent higher at 787.52 points after fluctuating between 0.8 per cent up and 2.2 per cent down. It had slipped 3.5 per cent in the previous session after rising for six straight weeks.
Across Europe, the FTSE 100 index was 0.1 per cent lower, while Germany's DAX was up 0.3 per cent and France's CAC 40 rose 0.2 per cent.
Tesco jumped 4.9 per cent after the world's No. 3 retailer reported signs of stabilisation in some of its markets, as it beat forecasts with a 10 percent rise in profits to £3.13 billion (€3.47 billion).
Other retail stocks also advanced, with Metro AG gaining 2.8 per cent, J Sainsbury up 1.6 per cent and Ahold rising 2.3 per cent.
Financial stocks fell, pressured by a report from the International Monetary Fund saying global write-downs of toxic debt among banks and other financial institutions in the United States, Europe and Japan could reach $4.1 trillion.
"There are some long-term positives from what we have seen in the market over the course of the past few weeks, but it simply moved too far too fast," said Henk Potts, equity strategist at Barclays Stockbrokers.
"There are going to be a number of storms before we can truly say that the recession is over," Mr Potts said.
"It's a case of reality hitting the market after six weeks of significant gains. We would be cautious about certainly buying into this rally in the short term."
Barclays was down 4.8 per cent, Royal Bank of Scotland dropped 5.9 per cent, BNP Paribas fell 2.8 per cent, Société Générale was down 4.5 per cent and Commerzbank shed three per cent.
Investors remained cautious following a number of grim company results and uncertain corporate outlook.
Deutsche Telekom fell 7.2 per cent after it cut its 2009 earnings outlook, while US-based Caterpillar, the world's No. 1 maker of building equipment, posted its first-quarterly loss in 17 years.
Chemical maker DuPont Co posted a 59 per cent fall in quarterly earnings and cut its full year profit forecast due to weak demand, while Merck reported lower-than-expected earnings that it attributed to the global economic slowdown.
Investors saw some silver lining as well. Government stimulus measures and low inflation helped boost German analyst and investor sentiment to its highest level in almost two years in April, ZEW economic think tank said.
Actelion Ltd, Europe's largest biotech company, surged eight per cent after it beat forecasts by more than doubling first-quarter profit, thanks to demand for its top-selling blood pressure drug Tracleer.
Tesco, which employs more than 440,000 people in 4,000 stores across 14 countries, also posted strong results from recently acquired stores in South Korea.
"Thankfully Tesco does have international presence and from an investment perspective this matters more day by day," said Howard Wheeldon, senior strategist at BGC Partners.
"To keep everyone happy and if UK sales really do begin to stagnate in perhaps two or three years time means that Tesco will require every inch of growth it can achieve from the international division."
Energy stocks were generally higher as crude prices rose after sharply falling in the day. BP, Royal Dutch Shell, BG Group, Tullow Oil and Total rose between 0.6 per cent and 1.3 per cent.
Pirelli posted a 60 per cent drop in first-quarter profit on flat revenue, as the economic crisis hit its tyre and real estate businesses and the holding company bore the cost of a major restructuring.
Its shares were, however, up 0.6 per cent.