Europe stock markets close lower

German trader scratches his head as markets head lower

LONDON, England -- European stock markets closed mostly lower on Thursday, with gains made by the London bourse offset by weakness in the German and French markets.

The London market closed higher after a strong first-quarter performance by Shell Transport & Trading that beat analysts' expectations.

The Dow Jones Stoxx Total Market Index of shares in European companies fell 0.57 points to 277.49. The Dow Jones Euro Stoxx Total Market Index, which tracks companies in countries that joined the single currency, was down 2.61 points at 270.67.

The Dow Jones Euro Stoxx 50 Index was down 32.3 points at 3,542.0 and the Dow Jones Stoxx 50 Index was down 12.2 points at 3,497.8.

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In domestic markets, London's benchmark list of leading shares, the FTSE-100 index, closed down 48.6 points, or 0.95 percent, at 5,174.1; the CAC 40 Index in Paris closed down 41.18 points, or 0.92 percent, at 4,421.56; and at 1715 GMT, Frankfurt's Xetra DAX was down 79.38 points, or 1.57 percent, at 4,961.82.

Most European bourses took a hit as investors yanked cash out of heavyweight telcos such as Deutsche Telekom, but put some of the money into autos and other cyclicals amid more signs of economic upturn to help profits.

Meanwhile, media leader Vivendi Universal made fresh four-and-a-half year lows as its shares sank 4.6 percent on continued worries about its balance sheet.

Oil giant Shell gained 3.7 percent after a steep drop in quarterly earnings still beat expectations, but investors looked nervously at the wider economic picture.

"We think the odds are that a recovery is under way but we don't think it will be a terribly strong recovery, and our biggest issue is that valuations are not particularly attractive even now," Jamie Sandison, European portfolio manager at Edinburgh Fund Managers, told Reuters.

Stocks have come under fresh pressure in the past two weeks as investors begin to doubt the extent of economic recovery after an earnings season that gave mixed outlooks at best.

The euro zone's manufacturing sector grew in April for the first time in 13 months and strengthening global demand has given a sudden boost to raw material prices, the Reuters Eurozone Purchasing Managers' Index showed.

Economy-sensitive sectors like autos, consumer cyclicals, basic producers, industrials, and retailers were all higher, along with some defensives such as foods, utilities and tobacco.

Retail banks, especially in the UK, also did well -- a sector which Edinburgh Fund Managers said was attractive because of steady earnings.

"As for equities as a whole, we are not expecting a great performance over the next 12 months," Sandison added.

On Wall Street, the Dow Jones industrial average was flat at 10,057 points, while the tech-heavy Nasdaq Composite shed 0.75 percent. The DJ Euro Stoxx 50 index was off 0.9 percent.

Investors looked to Friday's April U.S. non-farm payrolls as the next indicator of how much the U.S. economy is improving.

Europe's earnings season continues on Friday with carmaker Volkswagen reporting. Shares in Europe's biggest software house SAP sank 7.5 percent to a five-month low ahead of its annual shareholder meeting on Friday.

The European Central Bank on Thursday left euro zone interest rates unchanged, as expected.

Europe's telecom sector continued with its two weeks of almost unbroken declines on worries about the industry's gloomy profit prospects against a background of huge debt.

"As for telecoms, I think the market is starting to realise that further rights issues are inevitable because balance sheets are shot," said Edinburgh Fund Managers' Sandison.

"They have been appallingly managed, particularly regarding acquisitions. Shareholders will be asked to dip into their pockets to pay for management mistakes," Sandison told Reuters.