Eurostocks end mixed, E.ON surges on UK asset buy

European shares ended mixed yesterday as positive newsflow from some key companies countered profit-taking in other firms after last week's strong gains and as investors looked to a slew of earnings reports this week for direction.

German power company EON was a bright spot after announcing it would buy the UK energy retail assets and three power stations from Texas-based TXU Corp. for $2.1 billion.

Swedish telecoms equipment manufacturer Ericsson also rallied after an earnings upgrade, while French retailer Pinault Printemps Redoute jumped on reports it may sell its financial services unit for up to four billion euros.

But German chemicals firm Bayer was weighed down by worries about damages suits following the recall of its cholesterol drug and insurer Swiss Life sagged after it restated its first-half results.

Lex Werkheim, a fund manager at Eureffect Asset Management said there had been some profit-taking on the day following last week's six per cent rally, and pointed out that the market was awaiting a barrage of earnings reports from both in Europe and the US this week.

Sales figures from French carmaker Peugeot and results from Swiss food giant Nestle, engineering firm ABB and advertising bellwether WPP are some of the week's key reports from Europe.

And about 150 major US companies are also set to report their quarterly earnings this week.

"We are only about a third of the way into the S&P 500 companies' results and it's way too early to say that we have a clear picture of what third quarter earnings look like," said Werkheim.

"We don't want to be too optimistic about them because traditionally the best ones come first. Although I didn't see too many profit warnings, we might have some nasty surprises," he added.

At 1545 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 0.1 per cent at 908 points, while the narrower DJ Euro Stoxx 50 index rose 0.3 per cent to 2,519.77.

On Wall Street, the Dow Jones industrial average was up 0.9 per cent at 8,401 as the Nasdaq Composite index eased 0.2 per cent.

US tech stocks were undermined by software giant Microsoft, which said that a surge in first-quarter sales was unsustainable and forecast tough business conditions ahead.

Shares in E.ON rose 6.9 per cent as investors cheered a deal that bolsters the company's customer base and offsets tumbling generation profits in the UK.

The widely expected deal adds 5.5 million UK power and gas customers to E.ON's current three million, limiting the impact of slumping profits from its UK Powergen business, which it bought for E8.2 billion earlier this year.

Elsewhere, Ericsson soared 8.8 per cent, lifted by news that investment bank Morgan Stanley had raised its earnings per share estimates after the company's third quarter results last week.

Pinault Printemps Redoute jumped 8.7 per cent on the news that it may sell its Finaref financial services unit. Pinault declined to comment.

German drugs and chemicals firm Bayer was one of Europe's leading blue-chip losers, sinking 5.5 per cent after the firm's chief executive said the company faced 3,500 damages suits in the United States following the recall last year of its Baycol cholesterol drug.

The stock dragged the chemicals sector down 1.9 per cent as Swiss-based Syngenta lost 3.6 per cent and Dutch peer Akzo Nobel fell 3.6 per cent.

Cash-strapped insurer Swiss Life was also among Europe's biggest losers, sinking 8.4 per cent after restating first-half results to show a bigger net loss after finding it had miscalculated bond values.

It was the second time in a month that the firm had revised an earnings figure and comes ahead of a planned rights issue to beef up its capital base.