European stocks finished in the red in line with sluggishness in the US.

Across the markets, the German DAX fell 16 points to 6,031 with the French CAC one point lower at 4,012. The Swiss market fell 52 points to 6,579.

Kraft raised the cash portion of its hostile bid for Cadbury after agreeing to sell its frozen pizza business to Nestlé, but the Swiss foods giant has told the UK Takeover Panel it does not intend to make, or participate in, a formal offer for Cadbury.

Kraft said it is to offer an increased cash element in its 300p cash plus 0.2589 Kraft shares bid for Cadbury.

After selling off its North American pizza business to Nestle it intends to use some of the funds from the sale to offer Cadbury shareholders an additional 60p per Cadbury share or 240p per Cadbury American Depositary Share in lieu of some of the Kraft shares they would be entitled to after accepting the Kraft offer.

Banks are going well, with Credit Agricole, BNP Paribas, Commerzbank, Deutsche Bank and UBS all among the best performers.

Novartis, meanwhile, is posting losses for the second day in a row after it announced plans to buy the rest of Alcon on Monday.

In economic news, the number of unemployed workers in Germany fell by a surprise 3,000 in December, according to the Federal Labour Agency.

Elsewhere, a bill to repay UK and Dutch investors who lost savings when Iceland's Icesave bank collapsed in 2008 has been blocked by the country's president Olafur Grimsson.

Despite being approved by Iceland's parliament last week, Grimsson refused to sign the bill to repay $5bn (£3.1bn) following public outcry from the island's voters.

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