NEW YORK (Reuters) - Miners and tech issues pushed European shares to a lower close on Wednesday, but hints by Federal Reserve Chairman Alan Greenspan that U.S. interest rate hikes may not be imminent helped the market partly trim its losses.
Weak first-quarter production numbers knocked miner Rio Tinto 4.3 percent lower, while Anglo American also weighed on the sector, shedding 5 percent after part-owner AngloGold warned of weaker profits.
Positive earnings and outlooks lent some strength to the market, lifting stocks such as leading food group Nestle or trucks and engineering group MAN AG, while carmakers benefited from strong earnings and an improved forecast by industry titan Ford Motor.
Rate hike timing
Greenspan stole the show with an anxiously awaited testimony before Congress on the U.S. economy, during which he confirmed investors' fears that a more vigorous economic expansion may require higher interest rates to keep prices stable in the world's largest economy. But investors were partly relieved as Greenspan's comments that inflation should be contained for some time hinted that borrowing costs may not rise as soon as feared.
"Greenspan's message was 'we know where we are going, and it's higher rates, but we are not there yet'," said Paul Mortimer-Lee, chief capital markets economist at BNP Paribas in London. "What will determine when a rate hike happens is payrolls, whether or not we continue to see numbers as strong as the exceptional ones we got in March, and inflation data will be key as well."
The FTSE Eurotop 300 index ended off 0.9 percent at nearly 1,013 points, standing about 15 points away from its best levels for the year. The narrower DJ Euro Stoxx 50 index dropped 0.8 percent to 2,855.5 points.
Global equity markets have been rattled in recent weeks by fears that higher interest rates could cool off the U.S. economic recovery following a trio of surprisingly strong employment, retail sales and inflation numbers.
"A journey of 1,000 miles starts with one step and markets know that interest rates are a long way below their equilibrium level and once the Fed starts its rate hike cycle, it will eventually deliver quite a lot of rate hikes and deliver them very quickly," BNP's Mortimer-Lee said.
Solid earnings
The prospects of higher interest rates weighed on highly cyclical stocks such as basic producers, with BHP Billiton and Xstrata shedding nearly four percent each.
Technology shares also headed south, with German chipmaker Infineon off 5.4 percent despite posting a core profit three times higher than analysts' estimates and raising its growth forecast for the semiconductor industry to 22 percent from 18 percent previously.
Stellar quarterly results by cell phone maker Motorola also failed to lift European peers. Sweden's Ericsson closed 2.1 percent weaker. French telecoms equipment maker Alcatel slipped 4 percent.
But some strong earnings figures in Europe supported a number of stocks. Nestle gained 1.2 percent after the world's biggest food group reported a consensus-beating 5.1 percent rise in first-quarter underlying sales, and said this good start in 2004 should allow the company to meet its full-year growth and productivity target.
MAN AG also rose 1.3 percent after the firm reiterated its forecast of higher profits this year after seeing continued strong growth in sales and orders in March.
On the downside, news and information company Reuters shed 5.9 percent as it reported a marked slowdown in the decline of its main revenue stream but gave a guarded outlook, saying it was not time to "open the champagne."
Around Europe, the FTSE 100 was 0.6 percent lower, the DAX shed 0.9 percent, the CAC 40 was 0.8 percent weaker and the Swiss blue chip index lost 0.6 percent.
On Wall Street, the Dow Jones industrial average was flat at 10,312.7 points by 1630 GMT. The Nasdaq Composite was 0.5 percent higher at 1,988.4 points as the tech sector was buoyed by Motorola's surprisingly strong earnings.
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