(Updating with full report)
LONDON (Thomson Financial) - Europe's leading exchanges lost ground after a late pullback on Wall Street sparked by comments from former Federal Reserve Chairman Alan Greenspan that a correction in the Chinese stock market may be in the offing.
Air France-KLM, however, bucked the downtrend after the airline gave an upbeat outlook and raised its dividend.
At 8.54 am, the STOXX 50 was down 26.28 points at 3,903.45 while the STOXX 600 fell 2.77 points to 393.62.
'They are talking the market down to take out some of the speed, but I wouldn't take it too seriously,' said a Frankfurt-based dealer, suggesting investors are using Greenspan's remarks to lock in profits.
'Better now than later, when the market really overheats. But we do need to focus on the interest rates and oil prices instead,' he added.
Shares in Air France-KLM rose 2.4 pct after the airline carrier posted a 32.5 pct rise in full-year operating profit to 1.24 bln eur, as sales rose 7.6 pct to 23.07 bln eur.
The French-Dutch carrier also announced a dividend hike of 60 pct to 0.48 eur per share.
Looking ahead, it said it is targeting a further rise in operating profit and a 7 pct return on capital employed over the 2007-8 financial year.
The news wasn't quite so upbeat over at Alitalia.
Shares in the Italian carrier fell 3.1 pct after the ailing airline said its full year net loss widened to 625.6 mln eur from 167.7 mln eur partly due to a 197 mln writedown on the value of its fleet.
The Italian government has set a deadline on July 2 to present binding offers to buy a 39.9 pct stake in the ailing airline.
Shares in luxury good maker Richemont were down 2.5 pct as strong full-year results were offset by company comments that it faces uncertainties such as the continuing weakness of the yen and the dollar, as well as capacity problems going forward.
Shares in Barclays fell 0.8 pct amid some analyst disappointment over its lack of guidance for the second quarter even as the UK bank posted a 15 pct jump in first-quarter pre-tax profits, helped by a strong performance from its investment banking unit, Barclays Capital.
'The absence of management comments on consensus earnings expectations and outlook for 2Q07 performance, as well as a 'slight decline' in profit before tax at BGI (Barclays Global Investors), are causes for concern,' said broker Panmure Gordon, which maintained its 'sell' rating on the stock.
Barclays is currently locked in a takeover battle for ABN Amro with a consortium led by Royal Bank of Scotland.
Shares in AB Volvo fell 2.2 pct after it said deliveries from its truck operations, which include Volvo Trucks, Mack and Renault Trucks, fell 17 pct in January-April compared with a year earlier to 60,536 units.
In other news of note, France Telecom and Deutsche Telekom are expected to conclude within the next few days an agreement to exchange their respective Orange Nederland and Ya.com units, according to the French business press.
Les Echos said, citing unnamed sources, that an agreement will be announced at the end of this week or early next, once employees have been informed.
According to the newspaper, France Telecom is to sell the Dutch subsidiary of mobile phone division Orange for 1.6 bln eur, including debt, while Deutsche Telekom is to cede Spanish internet access provider Ya.com for 300 mln eur.
At last check, France Telecom traded little changed while shares in Deutsche Telekom gave up 0.5 pct.
Staying in M&A, shares in Continental AG fell 1.5 pct on a report in Manager Magazin suggested the automotive supplier has bid 11 bln eur for Siemens' VDO unit.
In broker action, shares in Metro AG fell 2.6 pct as the stock went ex-dividend and as Goldman Sachs downgraded the German supermarket group to 'neutral' from 'buy,' saying the benefits of its restructuring plans and eventual recovery are already factored into its share price.
Yesterday, Metro's Chief Executive Hans-Joachim Koerber said it would be investing around 2.5 bln eur this year as part of continuing plans to expand abroad, with most of the cash to be poured into its Media Markt and Saturn businesses.
He said the company will also be investing to transform its REAL food retail operations and reorganizing the stores it had bought from Wal-Mart.
Shares in RWE fell 1.3 pct after Credit Suisse downgraded its stance on the German utility to 'neutral' from 'outperform', saying the company is too exposed to rising costs on carbon emissions,
Shares in Vedior climbed 2.4 pct after Goldman Sachs lifted its rating on the staffing company by two notches to 'buy' from 'sell' to reflect the broker's more optimistic view of continental European industrial temping markets.
Later in the session European investors are likely to turn their attention back to the US, with the release of key housing and durable goods data. Weekly jobless claims are also on tap.
Sales of new homes are expected to come in at 860,000 for April, up slightly from the 858,000 units sold in March, according to economists polled by Thomson's IFR Markets.
Orders for durable goods, meanwhile, are forecast to have risen just 0.4 pct in April after a 3.4 pct jump in March.
Mark.cotton@thomson.com mc1/gp COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.