European stocks end at one-week closing low on financial woes

European stocks lost ground yesterday, ending at their lowest closing level in a week, as Washington's fresh banking rescue plan got a lukewarm reception while investors digested a raft of mixed earnings.

Sanofi-Aventis surged 8.1 per cent after the pharmaceutical group posted better-than-expected results and investors applauded the company's new growth strategy.

The FTSEurofirst 300 index of top European shares closed 0.3 per cent lower at 803.37 points, its lowest closing level since February 3.

But the picture was mixed around Europe, with UK's FTSE 100 index and Germany's DAX index both gaining 0.5 per cent and France's CAC 40 adding 0.2 per cent.

"As long as we don't get signals that the bottom has been reached for consumer spending and on investment spending, stocks will remain very volatile and stuck in a bear market," said Alexandre Iatrides, fund manager at KBL Richelieu.

"We're still in a downward trend, and the hopes surrounding the US banking rescue plan somewhat eclipsed for a while the negative earnings and macro news flow. But the plan is not as simple as people had hoped, and the focus is now back on the deterioration of the macro environment as well as on the complete lack of visibility for companies," he said.

US Treasury chief Timothy Geithner on Tuesday unveiled a new bank rescue plan that would put $2 trillion to work mopping up mortgage-related assets and unclogging the credit market.

Shares of banks and insurers were among the biggest losers yesterday, with Lloyds dropping 7.9 percent, Natixis losing 7.5 per cent and Aegon down 4.1 per cent.

AXA dropped 7.2 per cent as traders cited market talk that the European insurer would slash its dividend. A spokesman for AXA declined to comment.

BNP Paribas shed 2.1 per cent after shareholders of Fortis threw out the state-led deals that carved up their embattled financial group, delivering a blow to BNP Paribas's expansion plans.

"It's not completely over yet but they'll have to start again from scratch. We will know very soon if BNP wants to go ahead," said Kepler Capital Markets analyst Pierre Flabbee.

"On the one hand, BNP will be able to get out of having to finance Fortis and take on its illiquid assets. But the deal had a lot of sense. If it doesn't go ahead, I think it would be a shame," he said.

Also among the biggest drags on the market yesterday, French energy group EDF fell 3.3 per cent after French daily La Tribune reported that the company has increased a provision to reflect a year-long extension of regulated prices to €1.2 billion for 2009 and 2010. EDF, which is due to report results today, declined to comment on the report.