European stocks fell yesterday as the week's push to 18-month highs was scuppered by shaky US data and nagging doubts over earnings, while Vodafone recovered some ground ahead of its possible $35 billion bid battle.
European drug leader GlaxoSmithKline and Swiss bank CS Group eased for a second day as a slew of analysts downgraded the two groups, which released results on Thursday that raised concerns among investors.
French reinsurer Scor yesterday showed a 26 per cent slide in 2003 sales, sending its shares down 8.5 per cent.
Results and outlooks from German steel group ThyssenKrupp and Swedish bank SEB were better, however.
"Overall, the results don't seem to be too bad to me... but the problem is the downgrading to 2004 estimates that is creeping in," said Nicholas Williams, a European fund manager at Singer & Friedlander Asset Management.
The FTSE Eurotop 300 index closed down 0.2 per cent at 993.39 points.
For the week, the index was up one per cent after briefly straddling the 1,000-point mark for first time since August 2002, but investors seemed reluctant to push benchmarks too far, fearing that much of the good news coming from companies is already priced into shares.
"I would not be surprised to see a little bit of caution returning to the market," Williams said.
The narrower DJ Euro Stoxx 50 index dropped 1.2 per cent to 2,860.88 points.
European shares were steady until confronted with two sets of US figures that soured the mood and sent Wall Street lower in early trading.
The US trade deficit widened more than expected in December to $42.48 billion, suggesting that the dollar's recent slide has failed to help narrow the gap by discouraging imports. Prices of imports in January also rose sharply.
Meanwhile, the University of Michigan's preliminary reading of US consumer sentiment tumbled to 93.1 in February from January's final reading of 103.8, showing that people were cautious about the economy.
"It's unambiguously bad for stocks as too much demand is being met by foreign goods, and consumer sentiment took a big turn for the worse, though we think it was seasonal," said Steven Barrow, a strategist at Bear Stearns investment bank.
"It's a clear message for the dollar that it will go down." Barrow said it was difficult to square the Michigan index and bulging trade deficit with the upbeat message on US economic growth delivered by Fed Chairman Alan Greenspan earlier in the week.
The trade deficit implied that one per cent needed to be lopped off the fourth-quarter gross domestic product estimate for the United States, Barrow said. This week the greenback was back near its record low against the euro.
Vodafone, the world's largest mobile phone firm, rose 2.8 per cent to 136 pence, helping to ensure that London was among the few bourses to advance yesterday.
Vodafone and US rival Cingular Wireless were poised for a head-to-head battle over struggling AT&T Wireless of the US.
Meanwhile, basic producers rallied as Anglo-Dutch metals group Corus jumped 4.2 per cent, boosted by bullish first-quarter results from German rival ThyssenKrupp, whose shares fell 2.6 per cent.
Arcelor, the world's biggest steel group, rose 1.3 per cent. Corus was also lifted by news the stock has been added to an MSCI share benchmark tracked by many investors.
Mining companies rose, with Anglo American up 1.7 per cent and Xstrata up 2.3 per cent, amid bid speculation in the sector and hopes that China's insatiable demand for raw materials will remain undimmed.
When European bourses shut, in New York the Dow Jones industrial average was off 0.45 per cent at 10,643 points, weighed down by the weaker Michigan consumer index.
The Nasdaq Composite fell 0.7 per cent to 2,057 points.