Euro Shares Close Mixed, Gloom Returns

European stocks closed mixed Friday after a short rally during the day after better-than-expected consumer confidence data from the U.S. and on the back of talk of consolidation in the mining sector.

But the outlook was still gloomy, even as President Bush was preparing to say that tax rebates are the best way to stimulate the economy and help avoid a recession.

Analysts said the stimulus package was likely to get swift backing.

"I think the operative word in Washington this morning is fear," Joseph Brusuelas, from Ideaglobal, told "European Closing Bell."

"We're going to see a fairly efficient political compromise," Brusuelas added.

London's FTSE-100 spent most of the morning in the red, but turned around after the Office for National Statistics said UK retail sales fell 0.4 percent in the all-important December period, compared with expectations for a 0.2 percent rise. That was the fastest paced drop in a year and added pressure to the central bank to cut rates from 5.5 percent.

The index gave up most of its gains and closed nearly flat.

The Frankfurt DAX and the Paris CAC-40 closed more than 1 percent lower.

The Dow tumbled more than 300 points in the previous session on recession fears. But after stumbling early, shares in Asia staged a late comeback, with hopes that plans for a $150 billion tax-break stimulus package, combined with more interest rate cuts, could lift the US economy.

Among European sectors, autos were the worst performers, with banks also struggling, while basic resources stocks again found buyers.

Miner Rio Tinto rose 5 percent on market talk out of Australia that BHP Billiton was readying a sweetened offer for the company.

"People seem to be placing a lot of faith in the fiscal package in the United States, and the whole Rio Tinto story seems to be helping a bit ... maybe the Democrats and Republicans will agree in short measure on the package, but I still see some downside regardless," Edmund Shing, strategist at BNP Paribas Arbitrage in Paris, said.

Among other active stocks in Europe, German steelmaker ThyssenKrupp rose nearly 2 percent after its quarterly profit fell less than the market expected and the company affirmed full-year sales guidance.

Heavyweight oil stocks BP and Royal Dutch Shell both declined as oil hovered around the $90-a-barrel mark, while Royal Bank of Scotland, Barclays, Santander and ING were all lower.

And shares of New Star Asset Management plunged more than 30 percent in London after predicting significantly lower profit for 2008, compared with the year ago. The company also said assets under management declined in the second half of the year.