European shares fell on Friday, weighed down by hawkish comments from European Central Bank Governor Jean-Claude Trichet on the peripheral eurozone sovereign debt crisis, plus a rise in US inflation to a 2-1/2 year high in April. The pan-European FTSEurofirst 300 index of top shares closed down 0.4 percent at 1,140.53 points, giving back earlier gains after strong German and French GDP numbers had more than offset weaker numbers in parts of the periphery.
Volume was 98.3 percent of its 90-day average. Trichet's comments, however, "urged Greece" to stick to its reform plan and reiterated the view that the country should not restructure its debt. Most traders, though, believe Greece will have to restructure its debt, particularly as Trichet's comments on inflation pointed to the potential for further interest rate rises, which could worsen Greece's debt problems and hit markets.
"Trichet speeches over the past couple months have indicated a more hawkish stance," Veronika Pechlaner, a manager on the 100 million euro ($144 million) Ashburton European equity fund said. Banks featured among the worst performers, with the STOXX Europe 600 Banks index down 1 percent. Commerzbank and Dexia which both have exposure to Greek bonds were down 3.3 percent and 2.5 percent respectively.
The broader markets slipped on the eurozone peripheral concerns, with the FTSE 100 index down 0.3 percent, Germany's DAX 0.6 percent lower and France's CAC 40 down 0.1 percent. The Thomson Reuters Peripheral Eurozone index extended earlier losses, down 1.8 percent. Meanwhile, Airbus parent EADS was up 5.8 percent after forecast beating first-quarter earnings.