European shares edged lower yesterday, with German utility RWE heading decliners after a broker downgrade, as a dip in US consumer sentiment in June cooled economic recovery hopes.
A mixed opening on Wall Street deprived investors of clear direction, and heavily weighted energy stocks weighed on European blue-chip indices after a sharp overnight drop in the price of crude.
After a 30-per cent, three-month rally, investors are struggling to find where to go next in the face of a still sluggish macroeconomic picture and mixed earnings prospects.
In its final reading of consumer sentiment, the University of Michigan's index came in at 89.7 in June, a touch above a preliminary reading of 87.2, but lower than May's final figure of 92.1.
"All in all, prospects of economic improvement in the second half of the year remain modest," said CIC economist Valerie Plagnol. "Consumer spending is still the main driver behind the economy, but consumers may remain prudent because of a job environment that is at best expected to stabilise in the coming months."
By 1410 GMT, the FTSE Eurotop 300 index was down 0.27 per cent at 857 points, while the DJ Euro Stoxx 50 index was off 0.19 per cent at 2,448 points.
Market watchers said they expected further consolidation ahead of the second-quarter reporting season amid perceptions that the markets got ahead of themselves, given that earnings prospects remain blurred.
"We have a very mixed earnings picture, as beyond Q2 earnings it's really Q3 and Q4 results investors have to get worried about, with top-line growth that is non-existent," said Steve Previs from Jefferies International.
Around Europe, benchmarks were 0.3 per cent higher in London , down 0.2 per cent in Paris and flat in Frankfurt and Zurich.
In New York, the Dow Jones industrial average shed 0.3 per cent, while the tech-laced Nasdaq Composite was up 0.4.
Shares in RWE sagged 3.6 per cent after private bank M.M. Warburg downgraded its recommendation on the stock to "hold" from "buy," citing concerns about difficulties involved in the eagerly awaited revamp the company unveiled on Thursday.
Germany's second-biggest utility said it would reduce its management companies to seven from 13, bundle its generation activities and marketing operations into two strong units and cut 1,000 jobs to cut costs.
Another decliner was Franco-German drugmaker Aventis, off two per cent amid more concern over generic competition after Israeli drug firm Teva applied to produce and market a generic version of its top-selling Lovenox blood-thinner drug in the United States.
Still in the pharmaceutical sector, shares in Spain's Zeltia were suspended shortly before the company said a preliminary meeting of European Union medical authorities had cut the chances of its leading anti-cancer drug Yondelis gaining approval in the short term.
But there was good news for carmakers as the euro sagged to a six-week low against the dollar, increasing the competitiveness of European exporters in the key US market.
Insurers also gained, with Aegon rising 5.4 per cent on the back of a rating upgrade to "outperform" from investment bank Goldman Sachs.