European shares fell on Thursday, led by banks after weak earnings news from companies including Lloyds, and with investors cautious ahead of the latest European Central Bank interest rate meeting.
By 0849 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.3 percent at 1,131.61 points after falling 1.4 percent in the previous session on worries about global economic recovery and after some weak corporate earnings.
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The index fell just below its 50-day moving average after closing near it on Wednesday - a break below is seen as a negative signal for equities.
The market initially traded higher as investors went bargain hunting, but banking stocks kept the gains limited.
"Yesterday's falls were quite sharp and I expect today there will be bottom fishing," said Colin McLean, managing director at the 650 million pound Scottish Value Management in Edinburgh.
"We dislike the banking sector and Lloyds results will certainly impact UK banks today."
Banking shares featured among the worst performers. British bank Lloyds fell 4.7 percent after it suffered another 1.1 billion hit in Ireland and said it will take a 3.2 billion pounds ($5.3 billion) provision to cover it for losses from the mis-selling of protection insurance. [ID:nLDE7432FG]
Societe Generale, France's second-biggest listed bank, lost 2.7 percent after first-quarter results missed expectations. [ID:nLDE7432I6]
Out of the 38 percent of companies which have reported first-quarter results on the STOXX Europe 600 Banks index .SX7P, 50 percent have missed expectations so far, according to Thomson Reuters StarMine data.
Elsewhere in the financial sector, fund manager Schroders was down 4.1 percent after pre tax profits fell short of forecasts. [ID:nLDE74329L]
Away from financials, Swedish construction firm Skanska dropped 6.6 percent after it posted a bigger drop than expected in first-quarter pretax profits. [ID:nWEA8807]
ECB, BOE EYED
Investors were also nervous ahead of the European Central Bank and Bank of England interest rate decisions, with the main focus on the ECB conference afterwards.
Investors were waiting to see if ECB President Jean-Claude Trichet uses the "strong vigilance" code words, which would signal a rate rise in June. [ID:nLDE74325D]
"There is insecurity in the markets. There are interest rates decisions from the Bank of England and ECB and the conference will make clear if a rate rise will be in June," said Koen De Leus, strategist at KBC Securities.
"This is causing some insecurity."
Back with company news, not all results were bad. Adidas, the world's second largest sporting goods company, gained 3.1 percent after it raised its sales outlook for the second time this year. [ID:nLDE744057]
Elsewhere, Dutch financial services group ING rose 2.6 percent after it posted forecast-beating first-quarter profits. [ID:nLDE7431Z4]
Across Europe, the FTSE 100 index was up 0.04 percent, Germany's DAX was up 0.2 percent and France's CAC 40 was down 0.1 percent. (Reporting by Joanne Frearson; Editing by Hans Peters)