European shares ease ahead of US inflation data

European stocks reversed early gains to trade lower yesterday as indications of a softer start on Wall Street and firmer oil prices dented confidence ahead of US inflation data.

Selling in German index options also weighed in thin and jittery markets, traders said.

"There is some pressure to sell German futures which has been taking the whole market down," said one trader.

The June DAX future sank one per cent, outstripping a 0.5 per cent decline in the cash market and falls elsewhere in Europe.

By 0948 GMT, the FTSEurofirst 300 index of pan-European blue chips was 0.1 per cent lower at 1,071.6 points while the narrower DJ Euro Stoxx 50 index fell 0.3 per cent to 2,978.2 points.

Stocks have struggled after making a positive start to the year, as concerns about rising US interest rates and slowing global economic growth offset reasonable valuations and continued earnings improvements.

"So far, we have moved from complacency in January to caution in March-april. Capitulation could be next, but we are not there yet," strategists at Morgan Stanley said in a note, adding that some stocks have become very cheap and oversold.

US stock futures were pointing to a softer start for the three main indexes, with the producer price index for April at 1230 GMT a big focus ahead of the opening.

Economists expect the PPI to be up 0.4 per cent, driven mostly by high energy prices. US consumer price (CPI) data is due today.

In Europe, UK CPI inflation rose at an annual rate of 1.9 per cent in April according to the Office of National Statistic, holding steady near a seven-year high and in line with expectations.

Oil majors rose as crude prices edged back towards $49 a barrel.

Drugmakers were mixed around Europe with Switzerland's Roche up 0.7 per cent following a raft of promising clinical trial results for its cancer drugs.

Anglo-Swedish rival Astra-Zeneca also rose, up 1.1 per cent after promising early stage data on an experimental cancer medicine and after a report showed its Iressa treatment may help shrink breast tumours.