European equities bounced from the day's lows to end with small losses on Thursday, as gains in U.S. markets and rising oil shares offset the impact of weakness in banks -- last year's worst performers.
Retailers were worst hit, with the DJ STOXX retail index down 2.5 percent on a profit warning from British retailer DSG International and a gloomy outlook from clothing group Next. DSGI tumbled 27 percent and Next lost 6.8 percent.
The pan-European FTSEurofirst 300 index ended 0.2 percent weaker at a provisional 1,484.9, well above session lows of 1,472.9. It lost 1.3 percent on Wednesday, after closing 2007 with a 1.6 percent gain, its worst performance since 2002.
"Despite the various pressures facing today's market, persistent tame inflation remains the key factor underpinning positive equity-class returns," Jeff Applegate, chief investment officer at Citi Global Wealth Management said in a note.
"That's why we think prospects bode well for a long business and profit cycle -- and why global equities should see another year of positive returns in 2008."