Eurostocks trade flat as oils dip, France Tel soars

Europe's leading shares slashed earlier telecom-led gains and traded either side of breakeven in late trade yesterday, as an opening rally on Wall Street ran out of steam and as investors braced for a tricky results season.

Heavyweight oil stocks such as Britain's BP and France's TotalFinaElf led the fallers as crude prices eased after an OPEC output hike at the weekend.

By 1649 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was flat at 878 points, while the euro zone DJ Euro Stoxx 50 index was 0.4 per cent higher at 2,499.

Shares in Europe's biggest market London dropped by 0.6 per cent, traded flat in the Nordic region and Milan, but rose elsewhere.

The DJ Stoxx energy index easily led the sectoral loserboard, with BP, Italy's Eni, and TotalFinaElf down between 1.9 per cent and 2.6 per cent each, in line with weaker crude prices.

Strategists remained sanguine, despite the day's about-turn, still confident in the market's ability to pull away further from October's five-and-a-half year lows, as recovery slowly boosts company profits.

"A flood of results is about to burst on us like a huge wave, but the market's holding up rather well, considering," said Nigel Cobby, managing director for European equities at J.P. Morgan, citing ongoing fears of a war in Iraq and nagging economic uncertainties.

In New York, the Dow Jones industrial average was flat, while the tech-laced Nasdaq gave up initial gains of more than one per cent to trade 0.19 per cent down.

France Telecom was one of Europe's leading blue-chip gainers, jumping more than 11 per cent, while Deutsche Telekom rose 4.4 per cent after investment bank Goldman Sachs upped its rating on the sector to "attractive" from "neutral".

Also helping France Telecom was news the group did not intend to draw on state funding and that it was set to launch a three-billion-euro debt issue later in the week, as part of its refinancing plan.

Finnish paper maker Stora Enso jumped 5.4 per cent, while smaller rival UPM-Kymmene rose 3.4 per cent after Morgan Stanley upgraded its ratings on both stocks on the back of improved US paper markets.

European technology stocks such as Alcatel and Infineon fared well from expectations of higher spending on information technology, as investors readied for global chip leader Intel's results due today.

"Intel's capital expenditure plans will set the tone for global capex plans in 2003," JP Morgan analysts said in a note.

But strategists also cited nagging worries about a possible war on Iraq and also laid great store by the Federal Reserve's monthly survey of the US economy due tomorrow.

"The Beige Book will be closely watched to see if any isolated cases of weakness like Friday's non-farm payrolls are precisely that - isolated - and whether the overall US economy is holding up well or even firming," said Bank of America's European equities strategist Robert Kerr.

The world's biggest economy is seen as three to six months ahead of the European business cycle and has benefited from more aggressive monetary easing and tax cuts, so its recovery is considered crucial if Europe is to follow suit.