European shares ended flat on Thursday, after weak results from heavyweights Royal Dutch Shell and Santander were offset by data showing the US economic recovery was gathering pace. A less hawkish European Central Bank tone on interest rates had combined with falling US weekly jobless figures to turn the index flat in early afternoon trade, before the release of bullish US service sector data.
The FTSEurofirst 300 closed flat at 1,162.57 points, after earlier being as low as 1,154.96. Leading the earnings news was oil major Royal Dutch Shell, which fell 2.2 percent after its fourth-quarter profit lagged expectations, and banking group Santander, down 1.7 percent, hit by Spanish property price falls.
Also bearish, at least initially, was Institute for Supply Management data that showed the US service sector grew in January at its fastest rate in five years, fuelling inflation concerns and sending European shares lower. "The past few days we've seen a succession of surveys showing price pressures accelerating quite markedly at the beginning of the year, and this is the last in a long line of them," said HSBC economist Stephen Green.
The fact inflation was showing up in service sector surveys as well as manufacturing surveys was interesting, he said, as "it's probably indicative of inflation having a wider influence in the economy." The concern was soon shrugged off, however, and when added to the falling US weekly jobless claims, the economic outlook remained positive ahead of Friday's keenly watched US nonfarm payrolls data.
Also supportive in the afternoon session were comments from ECB President Jean-Claude Trichet that inflation poses no threat yet to medium-term price stability, as the central bank kept rates on hold. "The jobless figures coupled with what the ECB said help the index lift off the lows. You've also got commodity stocks turning back up as well. That's what countering the drag from Shell today," a trader said.
The STOXX Europe 600 Oil & Gas index led sectoral decliners, down 2.8 percent after the Shell results and a 0.5 percent slide in US crude futures on the back of a strengthening dollar. Benchmark Brent crude prices still remain strong, however, at around $101 a barrel, after running up sharply in recent days on the back of political turmoil in Egypt and fears it could spread to other oil-producing nations in the region.
On the upside, GlaxoSmithKline rose 3.6 percent on plans for a share buyback this year, while British telecoms provider BT rose 3.6 percent on bumper results and a strong outlook. Across Europe, the FTSE 100 index ended down 0.3 percent, Germany's DAX was up 0.1 percent, and France's CAC 40 fell 0.7 percent.