By Blaise Robinson
PARIS, June 5 (Reuters) - European stocks ended lower on
Thursday, falling for a second day in a row after ECB President
Jean-Claude Trichet left the door open to an interest-rate hike
in July, but merger activity lifted telecom stocks.
Banks were mixed, with Credit Agricole <CAGR.PA> sinking 8
percent to a five-year low after France's biggest retail bank
unveiled a much lower price than expected for the shares offered
in its 5.9 billion-euro rights issue.
Royal Bank of Scotland <RBS.L> rose 3.8 percent -- boosted
by a Citigroup rating upgrade to "buy" -- and Swiss lender UBS
<UBSN.VX> added 4.2 percent, as the two banks' rights issues
draw to a close. RBS's rights issue ends on Friday, while UBS
completes its offering next week.
The FTSEurofirst 300 <> index of top European shares
ended 0.2 percent lower at 1,309.51 points, the index's lowest
close since April 22, although UK stocks rose 0.4 percent.
"We still don't have much visibility and fears over the
health of banks continue to resurface here and there," said
Bruno Cavalier, economist at Oddo Securities, in Paris.
"But market sentiment has improved quite a lot over the past
two months. We thought we were going to hell at that time. Now
it looks more like purgatory, but we're still far away from
paradise."
European stocks' losses on Thursday were cushioned by easing
worries over the health of the U.S. economy after data showed
the number of U.S. workers filing new jobless claims fell
unexpectedly last week.
The data sparked a rally on Wall Street, where stocks also
rose after stronger-than-expected sales figures from Wal-Mart
Stores <WMT.N>.
The European Central Bank held interest rates at 4.0
percent, but Trichet said the bank was on high alert over
inflation and a number of policymakers supported raising rates.
Trichet said the Governing Council could raise rates as soon
as at its next policy meeting on July 3.
"Basically it is turning further towards hawkishness ...
they are not unanimous and we may expect an interest rate hike
in the short term," said Stefan de Schutter, an asset manager at
Alpha Trading.
"Even though they are divided at the moment, the ECB is an
institution that likes to take decisions on a consensus basis,"
Oddo's Cavalier said.
"And with the tough economic situation in Spain, Italy and
even France at the moment, I don't think ECB members will move
ahead with a rise next month. It's a threat aimed at avoiding
vicious mechanisms such as second-round inflation."
Around Europe, Germany's DAX index <> dropped 0.3
percent, UK's FTSE 100 index <> rose 0.4 percent and
France's CAC 40 <> gained 0.2 percent.
M&A FEVER BOOSTS TELECOMS
Shares of telecom operators were in the spotlight on renewed
mergers and acquisitions activity.
Vodafone <VOD.L> rose 3.8 percent after Verizon Wireless
<VZ.N>, in which Vodafone holds 45 percent, said it has agreed
to acquire Alltel for $28.1 billion in a deal which Verizon said
is expected to bring synergies of more than $19 billion after
integration costs.
TeliaSonera <TLSN.ST> jumped 6.5 percent after France
Telecom <FTE.PA> proposed a $41 billion takeover bid that the
Nordic group rejected as too low. France Telecom dropped 5.1
percent.
Telecom Italia SpA <TLIT.MI> added 4.5 percent, pushed by
France Telecom's planned bid for TeliaSonera and after news the
group would cut 5,000 jobs through 2010.
Nokia <NOK1V.HE> moved in the opposite direction, falling
3.8 percent after Goldman Sachs said in a note that the world's
top maker of phones could miss consensus earnings in the second
quarter and may not supply touchscreen phones in volume before
2009.
(Additional reporting by Patrizia Kokot in London; Editing by
Quentin Bryar)
