Eurostocks mixed as insurers diverge and oils gain

European stock indices were mixed in late trade yesterday, as investors discriminated between insurers' cash-raising efforts, shunning Swiss Life but snapping up shares in Zurich Financial.

Techs fell as traders looked ahead nervously to third quarter earnings from US software giant Oracle today, while oil stocks like BP and Royal Dutch/Shell gained as Brent crude oil prices held above $28 a barrel on growing fears of a US-led attack on Iraq.

Strategists sensed a growing risk aversion among investors due to a plethora of possible pitfalls in the weeks ahead, with markets in a holding pattern, just 10 per cent off recent five-year lows.

"We've got to get through the German elections this weekend and next week's FOMC, but even then, the Iraq factor and next quarter's earnings season could continue to hold back the market," said Michael O'Sullivan, pan-European equities strategist at Commerzbank.

"We've already seen warnings from Philips and BAE, and we could see more negative pre-announcements like that by the end of the month."

The US central bank hosts its interest rate-setting FOMC meeting on September 24, while Germany holds general elections on September 22.

By 1552 GMT, the FTSE Eurotop 300 index was down 0.17 per cent at 903 points, with decliners outpacing risers by around three-to-two.

The narrower Euro Stoxx 50 index fell 0.66 per cent at 2,512, while FTSE 100 benchmark in London gained 0.9 per cent, while those in Milan and Zurich traded flat.

In New York, the Dow Jones industrial average slipped 0.4 per cent and the Nasdaq Composite lost 1.5 per cent.

Trade on Wall Street was expected to be relatively light because of the Jewish Yom Kippur holiday.

The DJ Stoxx insurance sector shed 1.7 per cent, weighed down by a 11.9 per cent fall in Swiss Life after Switzerland's biggest insurer confirmed reports it aimed to raise 900 to 1.2 billion Swiss francs in a bid to offset the impact of weak markets on its earnings.

French peer AXA, Allianz, and Munich Re shed between 3.5 per cent and 4.9 per cent each as investors speculated which insurer would next seek fresh cash.

But shares in loss-making insurer Zurich Financial rose 4.7 per cent after sources familiar with its planned rights issue said investors would get two new shares for every three held.

At that ratio, Europe's third-largest insurer would be issuing some 58 million new shares to raise the maximum $2.5 billion it is tapping investors for, which would beat some market expectations for a more dilutive one-for-one issue.

The expectation of more rights issues will continue to hit sentiment, analysts said.

HSBC bank said the pressure on companies in other sectors to raise fresh cash will increase too, with telecoms, industrials, transport, hotels, media and luxury goods all candidates.

Shares in Credit Suisse Group added 2.7 per cent after insiders told Reuters it is unlikely to sell its CSFB investment bank, after the Financial Times newspaper reported it had been sounding out possible buyers.

Sources at the bank said that while Chairman and Chief Executive Lukas Muehlemann was interested to find out how the market values the group's businesses, including its Winterthur insurance arm, there were no plans to shed CSFB at this point.

Swedish telecom gear maker Ericsson - fresh from its own painful but successful and deeply-discounted rights issue - and Philips led the tech sector down, shedding 6.9 per cent and 4.2 per cent apiece.

Europe's biggest software maker SAP slid 6.4 per cent. In oils, BP rose 3.2 per cent and Shell added 2.3 per cent as November delivery Brent blend crude oil traded above $28 a barrel, maintaining the bulk of Friday's three per cent gain.

Elsewhere, German mobile phone group Mobilcom was a feature, almost tripling in value to 3.3 euros on news the German government had arranged 400 million euros in soft loans to stave off insolvency at the firm.

But debt-ridden shareholder France Telecom eased 2.4 per cent after the French government, which has a majority stake in the debt-ridden group, said it was looking to launch a multi-billion euro capital increase, but only once market conditions improve.