By Sitaraman Shankar
LONDON, April 29 (Reuters) - European shares ended sharply
lower on Tuesday, breaking a four-day winning run, as weak banks
and miners offset the impact of buoyant oil stocks and investors
turned edgy ahead of a U.S. rate decision on Wednesday.
The pan-European FTSEurofirst 300 <> index ended down
0.76 percent at 1,328.45 points, with British shares faring less
poorly than German and French peers as surging earnings lifted
BP <BP.L> and Shell <RDSa.L>.
The oil groups were the top two gainers on the pan-European
index, jumping nearly 6 percent.
But banks were weak, with UBS <UBSN.VX> falling 1.8 percent
and Barclays <BARC.L> 2.2 percent. Britain's biggest mortgage
lender HBOS <HBOS.L> unveiled a cash call and Germany's top
bank, Deutsche <DBKGn.DE> posted a quarterly loss and wrote down
assets.
HBOS fell 1.8 percent and Deutsche lost 0.4 percent.
The index accelerated its fall after poor U.S. housing and
consumer confidence data, but analysts said investor concern
focused increasingly on the Federal Reserve's rate decision the
following day.
"With the Fed tomorrow there is the risk that they might not
cut by 25 basis points, though they are more likely to cut and
send the signal not to expect any more," said NCB Stockbrokers
strategist Bernard McAlinden in Dublin.
"People are nervous about the economy but what has passed
are risks that the financial system is collapsing," he said.
Mining stocks were heavy losers in Europe, tracking a 1
percent fall in copper.
Rio Tinto <RIO.L> took the most points of the FTSEurofirst,
falling 3.5 percent, while BHP Billiton <BLT.L>, Anglo American
<AAL.L> and Xstrata <XTA.L> all fell 2.9-3.2 percent.
Roche <ROG.VX> fell 2.2 percent after U.S. unit Genentech
<DNA.N> said that a Phase II/III study of the drug Rituxan
failed to produce the desired result in patients with lupus, a
disease of the immune system.
Britain's FTSE 100 <> ended flat, while Germany's DAX
<> lost 0.6 percent and France's CAC <> ended 0.7
percent lower.
The FTSEurofirst 300 is on track for its best month since
October 2003, having gained more than 5 percent in April, but
the advances are widely seen as a bear market rally, and the
index is still 19 percent off 6-1/2 year highs hit last July.
BIG DAY AHEAD
Confidence among U.S. consumers fell to a five-year low in
April as they confronted the grimmest jobs market since 2004 and
prices of existing U.S. single-family homes extended their slump
in February, data released on Tuesday showed.
Wednesday's rate decision, however, is the week's big macro
event, to be followed by core inflation data and non-farm
payrolls later in the week.
All 20 primary dealers polled by Reuters last week predicted
that the Fed would cut rates 25 basis points, but any cut will
be widely seen as the end of a rate-cutting cycle. The Fed has
cut rates by 200 basis points so far this year to try and
prevent a credit market crisis from spreading to the wider
economy.
Fed fund futures showed an 18 percent chance that the
central bank will keep rates at 2.25 percent.
NCB's McAlinden said that it was surging commodity prices
that could counter any move to ease.
"The Fed is worried that the housing sector hasn't bottomed
out... but dearer oil prices are taking money out of consumers'
pockets," he said.
Among major decliners, shares in Michelin <MICP.PA> dropped
9 percent after the French tyre group cut its forecast for 2008
operating income.
Elsewhere in the sector, Daimler's <DAIGn.DE> first-quarter
earnings before interest and taxes (EBIT) fell a
worse-than-expected 40 percent as one-off charges weighed.
Daimler shares ended down 1.4 percent.
(Additional reporting by Eva Kuehnen in Frankfurt; Editing by
David Cowell)
