European shares close down on banks and drugmakers

European shares fell yesterday, hitting their lowest closing in seven weeks, led lower by banks and drugmakers, while concerns over Greece fiscal health also weighed.

Banks reversed earlier gains to feature among the worst performers after credit ratings agency Standard & Poor's issued an expanded version of a report which made negative comments on the UK banking system.

BNP Paribas, Royal Bank of Scotland and Standard Chartered fell 1.3 to 2.6 per cent. The pan-European FTSEurofirst 300 index of top shares closed down 1.2 per cent at 1,001.73 points after earlier being up as much as 1,027.63.

Across Europe, the FTSE 100 index fell 1.4 per cent, Germany's DAX lost 1.8 per cent and France's CAC 40 slipped 1.9 per cent.

Also weighing on sentiment was US durable goods data which came in weaker-than-expected."The numbers coming through were not as strong as expected particularly with the US durable goods data. That has put us on the back foot," said Stephen Pope, chief global market strategist at Cantor Fitzgerald."There is a sense that maybe we are going through some form of mild corrective play. But I think it is just a retracement rather than a full blown corrective move."

Drugmaker's were under pressure. AstraZeneca lost 4.6 per cent after it gave a downbeat forecast for 2010 with fourth quarter earnings that missed expectations.

Miners retreated as copper slipped 2.4 per cent. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata fell 2 to 4.3 per cent.

Oil stocks slipped as crude fell under $74 a barrel. BG Group, BP, Royal Dutch Shell and Total were down 1.2 to 2.6 per cent.

On the upside, technology stocks were in demand. Top mobile phone maker Nokia soared 9.9 per cent after fourth-quarter sales and profits beat expectations as it regained market share in smartphones.

Swedish clothing retailer Hennes & Mauritz gained 8.4 per cent after it reported a sharp rise in December and January sales and better-than-expected quarterly earnings.

Earlier stocks had risen after the Federal Reserve renewed its pledge to keep interest rates near zero and US President Barack Obama moderated his tone on bank restrictions in his State of the Union speech.

"He (Obama) held off from being as aggressive as he has been towards Wall Street and he was aimed at giving policymakers a bit of a talking to. The result of that was that the market was a lot happier," said David Morrison, market strategist at GFT Global.

"There are still some real concerns. Some of the concerns are that the FOMC (Federal Open Market Committee) made no mention whatsoever of the deteriorating housing market and the stubbornly high unemployment and these were missing compared to the previous statements," Mr Morrison said.