European stock markets closed mixed on Wednesday, giving up solid gains made in a robust technical rebound after US data suggested employment could be faltering badly as the US economy slows.

Dealers said European markets opened strongly after heavy losses on Tuesday sparked by growing concerns at soaring oil prices and inflation risks.

The prospect that the European Central Bank (ECB) will hike interest rates Thursday as it focuses on rising inflation – a record 4.0 percent in June – instead of cutting them to bolster growth dampened sentiment further.

Despite calls by French President Nicolas Sarkozy and other eurozone political leaders for restraint, dealers said there was little chance the ECB would take their advice to think about a boost to growth.

Signs of increasing trouble were plentiful – Marks and Spencer issued a profit warning due to slumping consumer demand and British home builder Taylor Wimpey failed to secure a rescue deal, sending its stock into freefall.

The growing stress on the corporate side is a cause of real worry for investors since earnings are the key factor in stock valuations and as the economy slides, so inevitably do returns.

In London, the FTSE 100 index fell 0.98 percent to 5426.30 points. In Paris, the Cac 40 lost 1.03 percent to 4296.48 points and in Frankfurt the Dax index was down 0.16 percent at 6305.62 points.

The Euro Stoxx 50 index of leading eurozone companies lost 0.13 percnet. The euro was at 1.5867 dollars.

In Asian trade, Japanese share prices closed down 1.31 percent, falling for a 10th straight session in the market's longest losing streak in more than 43 years.

Hong Kong shares lost 1.8 percent, hit by a Cathay Pacific profit warning because of soaring fuel costs, and Sydney shed 0.9 percent.

On Wall Street, stocks were weaker in choppy trade ahead of key US employment figures due Thursday.

The Dow Jones Industrial Average was down 0.33 percent at around 4.30pm GMT.

Analysts said some stocks had hit bargain prices following big declines in recent months – the DJIA has fallen over 13 percent so far this year, as concerns have mounted about the health of the US economy.

Economic worries continued as the ADP Employment Report showed employers shed 79 000 private sector jobs during June.

"This month’s decrease in employment was broad based across industrial sectors and suggests continued weakness in employment," the report said.

The survey was released a day before the government unveils a larger monthly survey on US employment which is expected to show 60 000 job losses after 49 000 in May.

In London, the US private sector job report undercut early gains – 1.59 percent at one stage – and alongside Marks and Spencer's profit warning dented already fragile confidence.

Marks and Spencer plummeted 24.53 percent to 240 pence, taking the sector with it. Tesco lost 5.32 percent at 343.70 pence and Sainsbury tumbled 6.53 percent to 290 pence.

Taylor Wimpey plunged 41.67 percent, having recovered some ground after being down 59 percent earlier.

The miners were not spared, running into heavy profit-taking to see BHP Billiton give up 4.45 percent to 1759 pence.

In Paris, stocks fell to their lowest point since July 2005 as investors took quick profits on the early gains following the US ADP report.

One dealer said a lot of trades were technical, switching from one sector, such as the oil majors which have held up relatively well, to another series in the hope of making some money in an overall depressed market.

Heavily weighted Total lost 1.39 percent to 52.28 euros while the under pressure banks found some opportunistic support, with BNP Paribas up 0.37 percent at 56.15 euros France Telecom extended gains, rising 3.47 percent to 19.82 euros on positive broker comment.

In Frankfurt, shares similarly gave up early gains, with dealers expecting the market to soon test its lows for the year around 6160 points on the Dax.

The fall came despite a positive lead from Deutsche Bank, up 3.89 percent at 54.48 euros, which said it would make a second quarter profit and did not need to raise fresh capital.

Dealers said the more confident statement – especially after a first quarter loss – was a real tonic and boosted the other banks.

Commerzbank jumped 4.80 percent to 18.98 euros.

Elsewhere in Europe, the Bel-20 index in Brussels fell 0.67 percent, Madrid's Ibex-35 was up 0.73 percent, Italy's Mib-30 added 0.57 percent, the AEX 25 in Amsterdam shed 1.48 percent and the Swiss Market Index slipped 0.09 percent.

AFP