LONDON, March 20: European equities pulled back on Tuesday in cautious trade on the eve of a US interest rate call, as investors digested the possible merger of British bank Barclays and Dutch peer ABN Amro, dealers said.

The US Federal Reserve was widely expected to keep its short term interest rate anchored at 5.25 per cent on Wednesday. Investors track higher borrowing costs because they increase loan repayments and raise companies' costs.

In Europe on Tuesday, London's FTSE 100 index of leading companies eased 0.03 per cent to 6,187.50 points, Frankfurt's DAX 30 slid 0.37 per cent to 6,646.73 points and in Paris the CAC 40 shed 0.42 percent to 5,435.84.

The DJ Euro Stoxx 50 index of eurozone blue chip shares decreased 0.42 per cent to 4,038.57 points.

Wall Street shares had raced higher Monday, with the leading Dow Jones Industrial Average closing up over 100 points, as sentiment was also boosted by several merger and acquisition deals, traders said.

Across Europe, the banking sector was in focus after Barclays and ABN Amro revealed overnight that they were in “exclusive” talks over a possible tie-up.

The mega-merger would create the fifth biggest global bank with a market capitalisation of more than 160 billion dollars (120 billion euros).

Shares in ABN Amro, which is listed on the Amsterdam stock exchange, surged 3.41 per cent to 30.96 euros on Tuesday, after a 9.6-per cent jump the previous day. In London deals on Tuesday, Barclays saw its share price leap 4.36 per cent to 706.5 pence.

But in Paris, Dexia shares sank by 2.51 per cent to 21.32 euros as analysts played down takeover speculation surrounding the Franco-Belgian bank.

In Frankfurt, Deutsche Post shares slumped 5.81 per cent to 21.87 euros as the group issued a disappointing outlook for next year.

Following the Barclays-ABN news, banking stocks were lifted in US deals on Monday.

Citigroup closed up 53 cents at $50.06 while Bank of America gained 75 cents at $50.37, and JPMorgan Chase finished up 55 cents at $47.58.

The Dow Jones index of blue chips closed up a robust 0.96 per cent at 12,226.17 points.

The Nasdaq composite spiked 0.92 per cent to 2,394.41 while the broad-market Standard Poor's 500 gained a strong 1.09 per cent to end at 1,402.06 points.—AFP