European shares mixed, weighed down by underperforming periphery

European shares were mixed on Thursday, with banks in Italy and Spain on the back foot following a recent rally, while commodity stocks were boosted as Brent crude oil prices hit $50 a barrel for the first time since November.

The STOXX Europe 600 was down 0.1 per cent at 348.06, with the FTSEurofirst 300 flat. Both indexes hit a 4-week high in the previous session.

Britain's FTSE 100, France's CAC and Germany's DAX were all flat to 0.3 per cent higher, but peripheral euro zone markets in Spain and Italy fell 1 and 0.6 per cent, respectively.

Euro zone banks fell 2.3 per cent after a strong rally on Wednesday, led down by Banco Popular which slumped 20 percent after it announced a rights issue.

Other Spanish banks Caixabank and Banco de Sabadell fell 4.3 per cent and 7 per cent, respectively, with Italian lenders UBI and Banco Popolare down 5 per cent.

Atif Latif, director of trading at Guardian Stockbrokers, said that the rights issue suggested that euro zone banks were "still a major concern''.

“Credit risk concerns, lack of credible asset quality, balance sheet issues and a lack of reserves... all this makes for gloomy reading for those with EU bank exposure,” he said.

However, oil companies rose 0.7 per cent after Brent crude hit $50 a barrel, boosted by a drawdown in crude stocks in the United States last week.

The move in the sector was muted, and it remained below highs for the year hit in April.

“When we broke through $30 and when we broke through $40, we were seeing real excitement in the market, but we've got a situation where Brent is above $50 but investors don't believe it is sustainable,” said Tony Cross, market analyst at Trustnet Direct.

“We've got the OPEC meeting starting next week, and Canadian supply is starting to come back... there are still uncertainties which can weigh on the oil price.”

The STOXX 600 Basic Resources index was the top sectoral riser, up 2.5 per cent as miners benefitted from a rise in the price of copper.

ArcelorMittal, the world's largest producer of steel, was the biggest gainer in the sector and the broader STOXX Europe 600 index.

It benefitted as Goldman Sachs raised its target price on the stock, and maintained its “conviction list buy" recommendation.

Analysts at the US bank said that consensus estimates looked conservative and its valuation looked attractive given that steel prices should be underpinned by low supply.

Newspaper group Daily Mail and General Trust fell 7.8 per cent after it said a downturn in the print advertising market was squeezing margins in its media business, resulting in an 11 per cent drop in first-half profit and a lower outlook for the year.