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European shares in worst shape since start of war in Iraq

European shares failed to retain early gains for the second session in a row on Friday and turned in their worst weekly performance since the start of the Iraq war four years ago on a host of concerns, ranging from China's economy to US mortgages.

The French CAC 40 index dropped 0.6 percent at 5,424.70 and the German DAX 30 index slipped 0.6 percent at 6,603.32. The UK FTSE 100 index closed a fraction of a percentage point higher, at 6,116.20.

Jeremy Batstone, at stockbroker Charles Stanley Securities in London, said it's too early to call a bottom to the market. Investors are still very nervous after a string of bad news, including the stock market falls in China, problems at subprime lenders and a broader economic slowdown.

"This is the first time that the Chinese tail has wagged the broader market dog," Batstone said.

Telecom stocks were among the biggest decliners after a downgrade for Deutsche Telekom extended the sector's decline from the previous session. Deutsche Telekom fell 2.4 percent after Merrill Lynch downgraded its to sell from neutral, citing deteriorating results, a lack of new cost-cutting measures, minimal disposals and the possibility of acquisitions.

Deutsche Boerse shares advanced 2.1 percent after the German exchange reported a 54 percent increase in the number of trades on its XETRA market last month, with Feb. 28 setting an all-time record for most trades in a single day.

Shares in Adecco, the world's largest staffing company, fell 4.6 percent after it reported revenue growth slightly below forecasts.

Italy's Mediaset dropped over 5 percent after the company's surprise announcement that annual gross advertising revenue fell 4 percent. Former prime minister Silvio Berlusconi's family has a controlling interest in the media group.

SAP slipped 2.2 percent, giving up some of the previous session's gains, which came on the back of a report that the firm's founders may sell their 32 percent stake to Silver Lake Partners. Analysts at UBS, however, said they think such a move is unlikely.

Airbus owner EADS dropped 4 percent as UPS said it would formally cancel its order for A380 freighter planes. On Thursday, Airbus said it would stop work on the A380 freighter version to concentrate on the A380 passenger version.

Shares in UK supermarket operator Tesco added 2.1 percent after Warren Buffett's Berkshire Hathaway disclosed it has built a 2.9 percent stake.
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