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Euro Shares End Worst Quarter Since 2002

European stocks closed mostly lower Monday as investors drew a line under the worst quarterly performance in equity markets in more than five years.

The FTSEurofirst 300 index of top European shares ended down 0.4 percent at an unofficial 1,260.39 points, bringing its quarterly loss to 16 percent, its worst quarterly performance since the third quarter of 2002 and the fifth monthly fall in a row.

This would be the longest losing streak in the index since a six-month stretch of losses from April to September 2002 and the most volatile month since October 2003.

"You can break the market down into two components. You've got the credit crunch affecting financials and then you've got the economic slowdown," said Kevin Lilley, a portfolio manager at Royal London Asset Management who helps manage 1.1 billion euros.

"We are now five years into this current economic cycle and I just think people's estimates are way, way too high," he said, adding: "It is difficult to see the market making major headway when there are going to be major downgrades coming through."

London's FTSE-00 index rose 0.2 percent, bringing its quarterly loss to 11.7 percent, while Frankfurt's DAX fell 0.4 percent, bringing its quarterly loss to 19 percent and Paris' CAC-40 rose 0.2 percent, which brought its quarterly loss to 16 percent.

In Switzerland, shares of UBS fell 0.4 percent on fears the bank would unveil more losses this week. UBS said at the weekend it started lowering the value of some structured securities held by clients.

M&A activity was in the air, as Pernod Ricardconfirmed it has won the auction for Absolut Vodka. The French drinks group is paying $8.84 billion to the Swedish government for holding company Vin & Sprit.

UK insurer Friends Providentrejected a third bid for from private equity JC Flowers, insisting the 150 pence per share offer significantly undervalues the group. Shares of Friends Provident rose by 2.9 percent.

Also in the Britain, shares of British Airways fell 2.4 percent after the airline warned travellers they might face delays flying out of Heathrow's new Terminal 5. Goldman Sachs also downgraded the company's stock to 'sell' from 'buy'.

In earnings, Inditexreported a full-year profit increase of 25 percent. The European clothing retailer said it could open as many as 640 new stores in 2008.

On the economic front, euro zone inflation hit new highs in March while economic sentiment retreated for the 10th straight month, according to official data.

- Reuters contributed to this report.