German data, Vodafone drag European stocks lower

European share indexes closed lower yesterday as a sharp fall in German investor confidence and a cautious outlook from mobile phone giant Vodafone, curtailed a four-day winning streak.

Vodafone closed down 4.8 per cent as rising competition and a trimmed 2006 forecast overshadowed a £4.5 billion share buyback and a doubling of its dividend.

Swiss drugmaker Roche was a positive influence, up 2.7 per cent to 154.5 Swiss francs following a bullish note from JP Morgan and positive results on an experimental eye drug from its majority-owned Genentech unit.

The FTSEurofirst 300 index of pan-European blue chips closed 0.1 per cent lower at 1,095.9 points on solid turnover of around 2.8 billion shares. Vodafone's decline accounted for the majority of the fall in the index.

The narrower DJ Euro Stoxx 50 index fell 0.1 per cent to 3,066.6 points, off its session lows thanks to a rally on Wall Street near the European close. Stocks have bounced strongly from a three-month low at the end of April, boosted by improved economic data and solid earnings in both the United States and Europe.

Fundamentals for the European markets are strong, with low valuations and profitability at record highs, but it is hard to see what would drive markets higher, said Patrik Schowitz, global equity strategist at HSBC.

"Earnings growth is slowing... roughly halving from last year and probably slowing again next year; growth is slowing globally and, in the meantime, we still have this debate going on in the States regarding inflation and interest rates."

In New York, the blue-chip Dow Jones industrial average was 0.4 per cent weaker at 10,482.3 points, while the Nasdaq Composite Index was steady at 2,055.9 points by 1616 GMT.

Around Europe, London's FTSE 100 and Frankfurt's DAX both closed 0.2 per cent lower, while Paris's CAC-40 ended down 0.4 per cent. In Zurich, the SMI rose 0.7 per cent, thanks to a strong performance from Roche and other drug stocks.