By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares ended mostly lower on Thursday weighed down by downbeat U.S. employment data, but Germany and France managed to eke out marginal gains.
Earnings reports from European corporate giants, including Barclays PLC and Unilever, also largely disappointed investors.
The Stoxx Europe 600 index fell 0.3% to 261.48 points.
Losses accelerated after U.S. data showed that the number of people applying for initial unemployment benefits jumped 19,000 to 479,000 in the latest week to the highest level since early April. Economists had expected initial claims to decline to 453,000 in the week ended July 31.
QE expectations lift bonds, equities
Expectations of further quantitative easing have supported both the bond and equity markets. But this isn't likely to last forever. Either bonds will be proved right on deflation and equities will sell off or equities will be proved right about a better economic environment and bonds will be hit hard.
The data came ahead of Friday's eagerly awaited U.S. nonfarm payrolls report for July.
"Everyone is a bit downtrodden ahead of tomorrow's non-farm payrolls figures," said Christopher Purdy, trader at Spreadex Ltd, in a note to clients.
"Many investors are half-heartedly preparing for bad news, but are unwilling to flee completely, which has held equities in a relatively narrow corridor today," he said.
Barclays shares drop sharply
In London, the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.08% dropped 0.4% to 5,365.78.
Shares of Barclays /zigman2/quotes/208409333/delayed UK:BARC -0.09% /zigman2/quotes/206581728/composite BCS -0.51% fell 4.7%. The bank reported a 29% rise in first-half net profit, but largely thanks to a number of one-off gains. Read more on Barclays.
In the consumer goods sector, shares of Unilever /zigman2/quotes/205449809/delayed UK:ULVR +0.68% /zigman2/quotes/204685760/composite UL +0.41% declined 5.2% after it warned that the economic environment is challenging, even as it reported a 39% jump in second-quarter net profit. Read more on Unilever.
Shares of food producer Danone /zigman2/quotes/205561941/delayed FR:BN +1.57% fell 2.1% in Paris.
On the positive side, shares of Aviva /zigman2/quotes/210517151/delayed UK:AV -0.10% surged 7.2% after the insurance group reported a forecast-beating 21% rise in first-half operating profit.
Mining giant Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO -0.23% gained 0.5% after its first-half net profit soared to $5.85 billion, underpinned by rising metals prices. Read more on Rio Tinto results.
France, Germany end higher
In France, the CAC-40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.26% ended up 0.1% at 3,764.19, led higher by shares of publishing group Lagardere SCA /zigman2/quotes/206737784/delayed FR:MMB -0.83% , which rose 4.3%.
Royal Bank of Scotland upgraded Lagardere to buy from hold, saying it raised its full-year forecast for the magazine division due to an expected recovery in advertising.
Shares of transportation and power firm Alstom SA /zigman2/quotes/209823934/delayed FR:ALO -0.44% gained 2.9% and those of aerospace company EADS advanced 3%.
The German DAX index /zigman2/quotes/210597999/delayed DX:DAX +0.41% edged up 0.04% to 6,333.58.
Shares of cosmetics company Beiersdorf AG /zigman2/quotes/210479173/delayed DE:BEI +1.28% dropped 5%. The firm reported growth in second-quarter profit, but warned that its consumer business is not back on the growth path of recent years.
Deutsche Telekom AG /zigman2/quotes/205973137/delayed DE:DTE +0.16% fell 2.5% after it reported a decline in quarterly profit.
In Greece, the ASE Composite stock index fell 1.8%, even as officials from the International Monetary Fund and the European Union said that the Greek economic reform program has made a strong start. Read more on Greece.
In Frankfurt, European Central Bank President Jean-Claude Trichet said it was too early to "declare victory" in the economic crisis. The comments followed decisions from the European Central Bank and the Bank of England to leave interest rates on hold, as widely expected. Read more on rate decisions.