European shares fall as bond yields rise, metals prices slide

By Kit Rees and Helen Reid

LONDON (Reuters) - Worries over rising bond yields and falling metals prices trumped well-received earnings updates from Kering and Credit Suisse on Wednesday, sending European shares to a one-week low.

The pan-European STOXX 600 index was down 0.8 percent at its lowest in a week. Germany's DAX fell 1 percent.

Concern remained over higher bond yields after the yield on the U.S. 10-year Treasury breached 3 percent level on Tuesday, making equities relatively less attractive.

The basic resources sector, which has been a key support for stocks, also collapsed as aluminium prices fell for a fifth day. Glencore, Rio Tinto and Anglo American all tumbled 1.4 to 4 percent.

Comments from big U.S. companies such as Caterpillar, suggesting that the progression in earnings had peaked, made investors more cautious.

Caterpillar's results drove European industrials, after the company said it would steel tariffs would make it harder to pass on higher raw-material costs.

Investors are hoping first-quarter earnings will inject new life into equity markets. But even some upbeat earnings reports failed to boost overall sentiment.

Kering closed 4.7 percent higher, after hitting a record earlier in the day. The luxury goods company posted impressive first-quarter results thanks to demand for its Gucci clothing and handbags.

The luxury conglomerate helped boost the retail sector up 1.3 percent, the best sectoral gainer.

Credit Suisse stood out among falling banks. It shares jumped 4.2 percent after beating first-quarter profit expectations as a revamp at the bank bore fruit.

But a number of stocks were badly punished after first-quarter results. Negative effects from currency swings and higher raw-materials costs were two recurring themes.

German lighting group Osram Licht sank 17.1 percent to a 16-month low after cutting its profit guidance because of slower trading and a weak dollar.

Norwegian consumer goods maker Orkla sank 7.7 percent, its worst fall in five years, after reporting that higher raw-material prices caused its earnings to miss expectations.

"Fourth-quarter updates were littered with cost pressures, a theme which has spilled into first-quarter results. Raw materials, freight, labour, borrowing costs and FX volatility [are] increasingly prevalent," wrote Mirabaud head sales trader Mark Taylor.

STMicroelectronics shares rose 3 percent after an upbeat assessment on second-half demand for its smartphones-ocused products.

Finnish engineering group Metso gained 7.3 percent after results easily beat analysts' expectations thanks to strong orders for mining equipment from India, China and North America.

In M&A news, shares in Shire reversed early gains to trade 2.6 percent lower despite saying it would recommend Takeda's sweetened $64 billion offer to shareholders. Investors fretted over Takeda's ability to buy a company twice its size.

(Reporting by Kit Rees and Helen Reid; Editing by Larry King)