European shares fall as business survey disappoints

London - European shares gave up early gains on Thursday after a survey showed growth in Germany's private sector slowed and French business activity barely grew in April.

Another survey showing factory activity in China, the world's largest metals consumer, contracted at its fastest pace in a year in April, hit mining stocks in particular. The STOXX Europe 600 Basic resources index fell 1.4%.

Negative company news added to downwards pressure.

Mobile telecom equipment maker Ericsson fell 8.1% after saying it expected sales in its main North American market to stay sluggish and posting first-quarter operating profit below expectations.

After opening higher on the back of some positive company updates, the FTSEurofirst 300 index was down 0.5% at 1 619.72 points by 10:08 following Markit's flash composite Purchasing Managers' Index (PMI) for Germany.

The German PMI index fell to 54.2 from March's eight-month high of 55.4. France's PMI showed slower expansion than forecast in the services sector and a faster contraction than expected in manufacturing.

"Even though there is a clear improvement on the economic front in Europe, the game is not won and the jury is still out," BNP Paribas Fortis Global Markets' head of research, Philippe Gijsels, said.

"The market's reaction after German and French surveys shows that equities are vulnerable to disappointing economic figures."

Among standout stock movers, German building services firm Bilfinger slumped 15% after issuing its fifth profit warning in less than a year late on Wednesday, saying its US oil and gas business was faring worse than expected and demand in its power plant business remained weak.

Swiss Re fell 8.7% after shares in the world's No. 2 reinsurer traded without the attraction of its latest dividend payouts.

However, losses witnessed by the broader stock market were capped by positive updates from some companies.

Shares in tyre maker Michelin rose 4.7%, making them top gainers in the FTSEurofirst 300, after first-quarter revenue rose 5.6%, boosted by a weaker euro. The STOXX Europe 600 auto and parts index rose 1.1%.

French spirits maker Pernod Ricard rose 3% after posting better-than-expected third-quarter sales, reflecting improving cognac sales in China, its second-largest market, and also stronger sales in the Americas.