European stocks ended mixed Wednesday, despite surprisingly good news from the U.S. retail sector, which pulled the major indexes higher in the afternoon session. Weak telecoms and basic recourses stocks provided a major drag to sentiment.
U.S. retail sales rose 0.3 percent last month from December, largely reflecting increases in sales of new cars and gasoline. Economists had expected the gauge to drop by 0.4 percent. Excluding autos, gasoline and building materials, retail sales climbed 0.2 percent.
European stocks spent the morning in the red as a slew of earnings reports from companies like Rio Tinto, Peugeot Citroen, Total and Arcelor Mittal failed to inspire confidence in investors.
"What we’re seeing, I think, is that sentiment regarding the credit mess is so low across the piste that all negative news flow is being leapt upon," Fergus O'Sullivan, executive director from Morgan Stanley, told "Power Lunch Europe."
No let-up in volatility kept investors uncertain of direction, keeping many away from the temptation to buy beaten-down stocks at discount prices.
"Bottom picking is a dangerous game … from a trading perspective we have ridiculous volatility at the moment, it's a fantastic opportunity to lose a lot of money," independent trader Louise Mayo told CNBC.com.
Mining Merger in Focus
The basic resources sector was the worst performing sector -- the Dow Jones STOXX index was off 2.2 percent -- with investors concerned that big deals in the sector may not materialize.
Rio Tinto reported full-year operating profit that rose 1 percent and also boosted its dividend by 20 percent. The stock closed 0.4 percent lower after the company said it is committed to defending itself against BHP Billiton's hostile bid. Rio CEO Tom Albanese told CNBC Europe his company's value is much higher than BHP's offer.
Shares of BHP ended 0.8 percent lower.
Meanwhile, ArcelorMittal, the world's largest steelmaker, announced record 2007 results in line with analysts' expectations and gave an upbeat forecast for the first quarter of 2008 as global demand for steel remains healthy.
But the stock lost 3.6 percent on profit-taking, as shares have risen 24 percent since mid-January.
Shares of Total closed flat after the company delivered strong earnings numbers. Its profit beat expectations after the French oil major's projects came online. The company predicted significant output growth in 2008.
Meanwhile, French automaker Peugeot Citroen posted mixed 2007 results, with a better-than-expected operating income for the year which boosted margins to 2.7 percent. But it remained off an ambitious long-term target of 5.5 percent to 6 percent. Shares ended 4.7 percent higher.
And ABB CEO Fred Kindle is to leave the company due to differences of opinion about the leadership at the Swiss engineering group. It reported earnings early, with profit exceeding expectations. Shares were 5.1 percent lower.