By Danilo Masoni and Alistair Smout
MILAN/LONDON (Reuters) - European shares fell on Thursday after the Bank of Japan unexpectedly held off from expanding monetary stimulus, while Spanish bank BBVA and Airbus fell on disappointing earnings updates.
BBVA was the worst-performing stock in Europe, dropping 8.5 percent after it missed estimates with a 54-percent fall in first quarter net profit.
"European markets are lower today first of all (because) there are probably more earnings disappointments than beats and beats are based on dramatically lowered expectations," Will Hamlyn, investment analyst at Manulife Asset Management, said.
Hamlyn also said the sharp fall in the Nikkei that followed the BOJ decision was weighing on sentiment, and that there was some profit taking as markets traded well above February lows.
The pan-European FTSEurofirst 300 index, which hit a three-month high last week, was down 1.3 percent by 1131 GMT, while the euro zone's blue-chip Euro STOXX 50 index dropped 1.9 percent.
European stocks tracked a pullback on the Nikkei and other major stock markets after the BOJ's move offset earlier momentum triggered by the U.S. Federal Reserve staying tight-lipped on whether it would raise interest rates in June.
Airbus also fell 6.8 percent after it reported a heavier-than-expected seasonal outflow of cash and warned of serious challenges for its A400M military plane, even as profits came in slightly ahead of expectations.
"Cashflow was weak in the quarter, reflecting the 2016 delivery profile... The scale of the free cash outflow in 1Q could cause some concern, but we'd say that this fits with the usual seasonal pattern," analysts at RBC said in a note, rating the stock at "sector perform".
Lloyds fell 2.9 percent after it reported underlying profits in line with expectations, keeping first quarter revenues steady and cutting bad debts despite the challenging economic environment.
Among the top performers, Deutsche Bank rose 2 percent after it posted a surprise net profit in the first quarter, helped by lower litigation costs.
(editing by Dominic Evans)
