LONDON (AFP) - European stock markets retreated on Wednesday, with investors booking profits ahead of an update from the US Federal Reserve and in reaction to eurozone unemployment data.
Meanwhile the euro slipped as strong US jobs data heightened chances will continue with its cuts to its montly purchases of bonds.
London's benchmark FTSE 100 fell 0.50 percent to end the day at 6,721.78 points, while Frankfurt's DAX 30 slid 0.09 percent to 9,497.84 points and the CAC 40 in Paris slipped 0.04 percent to 4,260.96 points.
"Traders are playing it safe as they await the update from the Fed," said David Madden, market analyst at IG traders.
"Tonight's minutes will give us an insight into why the US central bank decided to trim its bond-buying scheme, and we are likely to see low volumes and volatility until then."
Investors are awaiting the release of minutes from the Federal Reserve's policy meeting to see if another cut in its stimulus could be on the cards, while closely watched jobs figures are due later in the week.
The US central bank said at its last meeting that from January it would cut its bond-buying by $10 billion a month to $75 billion. Minutes for that gathering are due for release later on Wednesday and could give clues about its future intentions.
US stocks were mixed Wednesday as a strong report on US private-sector job growth created room for further Fed cuts.
In midday trade, the Dow Jones Industrial Average fell 0.34 percent to 16,474.55 points, while the broad-based S&P 500 edged up 0.04 percent to 1,838.59 and the tech-rich Nasdaq Composite Index rose 0.37 percent to 4,168.50.
The US private sector added 238,000 jobs in December, according to payroll firms ADP, well above the consensus estimate of 203,000.
In the eurozone, unemployment continued near record highs in November at 12.1 percent but there were signs the bad times may be easing as the debt crisis peaks out, analysts said on Wednesday.
They said other data, notably a sharp improvement in retail sales, suggest the economy could be holding its own again after a soft patch but progress would remain slow.
The eurozone jobless rate came in at 12.1 percent in November, unchanged from October, while retail sales rose 1.4 percent by volume, more than reversing a fall of 0.4 percent in October, the Eurostat statistics agency said.
Mothercare shares take a 'caning'
In Britain, which is part of the European Union but not the eurozone, investors focused on Christmas trading updates.
Shares in Sainsbury's dropped 2.4 percent to 360 pence after Britain's second-biggest supermarket group announced mixed quarterly sales. Sainsbury's reported that a tough autumn gave way to a record Christmas period, highlighting shoppers' tightening of budgets amid austerity.
Shares in Mothercare, which sells products for babies and toddlers, crashed by 30.6 percent to close at 291.5 pence after the group shocked the market with a profits-warning.
"Mothercare shares took an absolute caning ... after reporting a 4% drop in like for like sales in the most recent quarter, and reporting that it was likely to miss market expectations for full year profit," said CMC Markets analyst Michael Hewson.
In Paris, on the secondary SBF market, shares in French video games software company Ubisoft jumped by 6.2 percent to 10.90 euros, boosted by a decision by China to open its market to foreign game consoles.
The decision opens up huge potential for games software companies such as Sony and Microsoft.
Asian markets ended mixed on Wednesday, but Tokyo surged in response to a weaker yen and a Wall Street rally a day earlier that had been sparked by stronger US economic data, traders said.
In foreign exchange, the European single currency dropped to $1.3588 from $1.3613 late on Tuesday in New York.
The euro fell to 82.55 British pence from 83.00 pence Tuesday. The British pound rose to $1.6459 from $1.6399.
Gold prices dipped to $1,221 an ounce from $1,227.50 Tuesday on the London Bullion Market.