European shares fell early on Friday in choppy trade, as question marks over some corporate earnings and weaker financials offset gains made on the back of rallying oil stocks and upbeat telecoms. At 0856 GMT, the FTSEurofirst 300 index <.fteu3> was down 0.3 percent at 1,563.15 points, having risen more than 1 percent on Thursday when more weak U.S. data raised the prospects of a stock-friendly U.S. rate cut next week. Swedish engineering group Sandvik fell 7 percent after posting poor quarterly results, while Ahold dropped 4.7 percent after the Dutch supermarket group said its revamp of stores in the United States would continue to hurt margins. Swedish bank SEB fell nearly 3.4 percent after its third-quarter operating profit came in just below market consensus after taking a hit in fixed income from recent credit market upheavel. Elsewhere in the sector Unicredit fell 2.1 percent on vague talk that Munich Re was selling the small stake it owns in the Italian bank. Munich Re declined to comment. "The earnings season -- some good, some bad. Generally speaking I think the market is focusing a lot on earnings risk and you can see that with some of the price moves," said Philip Isherwood, strategist at Dresdner Kleinwort. Oil stocks benefited from rising prices, with U.S. crude hitting a record at above $92 a barrel. BP was up 1.3 percent, Royal Dutch Shell gained 1.5 percent and Total rose 1.4 percent. U.S. Reuters/ University of Michigan Surveys of Consumers release the final October consumer sentiment index at 1400 GMT. Analysts said U.S. markets continued to be unpredictable. "We've seen some pretty volatile days in the U.S. this week ... So I think there's a little bit of caution in terms of what are you going to see from the U.S.," said Isherwood. British drugmaker GlaxoSmithKline fell 1.7 percent, the top-weighted loser on the index, taken down by recent downgrades after poor results and the weakness in the dollar. OTHER SIDE OF THE EARNINGS COIN Several companies reported robust results, underlining analysts' views that earnings growth in Europe is becoming increasingly selective. Shares in Nordic telecom leader Telia Sonera climbed 4.7 percent in their largest daily rally since May 2006 after beating expectations with third-quarter core earnings and annoucing plans to return more than $1.5 billion to shareholders. This comes a day after France Telecom's shares jumped nearly 9 percent on strong results. Auto stocks also roared on robust results. Shares in PSA Peugeot Citroen gained nearly 4.4 percent after the French car maker posted a 12 percent rise in third-quarter sales, beating market expectations. Shares in rival Renault SA surged 3 percent after Nissan Motor Co , in which Renault has a 44 percent stake, reported a surprise 12 percent gain in quarterly operating profit. Volkswagen rose 0.1 percent after posting a near 50 percent gain in nine-month operating profit thanks to resurgent earnings at its core VW brand after the world's fourth largest carmaker cut thousands of job cuts last year. The biggest percentage gainer of the pan-European index was Portuguese bank Millennium bcp , up nearly 6 percent after a source close to a Millennium shareholder said the bank's chairman has backed a merger proposal from smaller rival BPI and has begun urging shareholders to accept the deal.
