European stocks retreated from their earlier highs yesterday afternoon as Wall Street opened lower, with an analyst downgrade of chip bellwether Intel raising concerns ahead of its mid-quarter update.
Investment firm Merrill Lynch lowered its view on Intel and six other semiconductor stocks and said it expected Intel to tighten its quarterly revenue outlook when it releases its update after the US market closes.
Shortly after the US opening, the Nasdaq index was down 1.4 per cent and the Dow Jones industrial average shed 0.7 per cent.
The FTSE Eurotop 300 index, which closed at eight-month lows on Wednesday, retraced most of its earlier gains to stand up 0.1 per cent by 1345 GMT, while the narrower Euro Stoxx 50 index rose 0.9 per cent.
Despite the pullback the European market remained broadly firmer and drew some support from the European Central Bank's decision earlier to leave interest rates unchanged at 3.25 per cent.
"It seems that the ECB...are comfortable with rates where they are. Excepting a very big surprise we should not expect another cut in rates in the months to come," said Aurel Leven economist Jean-Louis Mourier.
A rise in oil prices amid renewed conflict in the Middle East underpinned a 0.8 per cent rise in European oil shares. The sector was also supported by investment bank Goldman Sachs upping its earnings estimates for oil majors.
"Valuations of oil shares are starting to look quite attractive again and second-quarter upstream earnings should be solid given the high price of crude recently," said Ignace De Coene, an equity manager at Fortis Investment Manager, who manages about 120 million euros.
Heavyweight BP added 0.4 per cent as ToalFinaElf rose 1.3 per cent and Royal Dutch firmed 1.7 per cent.
Dutch retailer Royal Ahold NV was Europe's top gainer after reporting better-than-expected first quarter results and maintaining its full-year forecast.
The stock added 6.2 per cent to 23.47 euros and was the main driver behind a 0.7 per cent rise in the European retail index.
Other standouts included Italian bank Banca Nazionale del Lavoro, which notched up a 2.9 per cent gain on renewed speculation that it would merge with sector peer Monte dei Paschi di Siena.
Vivendi Universal, the heavily indebted media titan, added 2.2 per cent on reports the company could be close to selling its loss-making Italian pay-TV unit Telepiu.