Eurostocks mixed after data, Aegon and Milan sag

European blue chips were mixed in light trade late yesterday after a rally fizzed out as data showed business confidence in the key US economy remained capped by war fears.

Britain's GKN and Pearson led the climbers as investors cheered their profit reports. The market had rallied after a six-year low set in the middle of last week.

But concerns about a possible dividend cut slammed Dutch insurer Aegon, while Eni oil and gas group helped drag Milan down, along with Unicredito as the battle for control of Italian insurer Generali stepped up a gear.

"We saw a big drop in orders and employment and a rise in prices, so all-round it's not good," said Peter Ostler, head of research at futures broker Man Financial, after the influential Institute for Supply Management's index of US manufacturing activity fell to 50.5 in February from 53.9 in January.

The drop was bigger than expected and left the index hovering just above the 50 reading which denotes an expanding manufacturing sector in the world's biggest economy.

By 1728 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was up 0.28 per cent at 769 points, while the narrower DJ Euro Stoxx 50 index rose 0.18 per cent to 2,144 points.

But trading volumes were below average and advancing stocks barely outpaced fallers, as Italy's benchmark Mib-30 index underperformed the rest of the region and slipped 1.1 per cent.

The pan-European benchmark Eurotop 300 closed at a six-year low last Wednesday.

Shares in Aegon sank 4.3 per cent with dealers blaming worries the insurer will cut its dividend when it reports a forecast slide in 2002 net profit on Thursday due to hefty provisions.

Italian energy group Eni shed 2.8 per cent after investment bank Schroder Salomon Smith Barney investment cut its rating on the stock to "in-line" from "outperform".

But Italian insurer Generali continued its meteoric rise, gaining 5.0 per cent. The stock is now up 37 per cent during the past month as the battle to win the group heats up ahead of next month's shareholder meeting.

Unicredito, an Italian bank that is building up a stake in Generali, dropped 5.5 per cent.

British engineering firm GKN rose 8.6 per cent after posting a forecast-beating rise in 2002 earnings and saying there were no signs of a substantial fall in demand for the car parts it makes.

Shares in Pearson leapt 7.5 per cent after the publishers of the Financial Times newspaper reported pre-tax profits of 399 million pounds that were in line with expectations, to the relief of investors fretful of any negative surprises.

Deutsche Telekom fell 4.0 per cent despite taking steps to reassure staff after a number of law firms last week renewed allegations of share fraud and opposition politicians joined the fray.

Shares in French utility Vivendi Environnement slid 5.1 per cent. French broker Oddo Pinatton cut its rating on the sector to "underperform" ahead of Vivendi's earnings today.

Benchmark indices were also mixed on Wall Street, with the Dow Jones industrial average up 0.3 per cent at 7,912 points and the Nasdaq Composite down 0.21 per cent at 1,334 points.

A possible war in Iraq continued to drag on in the background as US-British air patrols stepped up their attacks on Iraqi air defences while the UN said Baghdad would submit a new report on its poison gas stocks in a week's time in a bid to avert a US-led invasion.

Some market experts said they were unconvinced that shares would trade much higher even if geopolitical tensions were resolved.

"The dominant market trend is still downward, even without the war factor, because both the macro and micro backdrop is unsupportive," said Cesar Martinez at GesMadrid, the fund management arm of Spanish savings bank Caja Madrid.

Strategists said they sensed companies were successfully adjusting to a tougher business environment and share price valuations adequately reflected this.

Of the European blue-chip firms which have so far reported their full-year results, more than two-thirds have either surprised on the downside or in been in-line with expectations, said strategist Ian Scott in a Lehman Brothers note.

But many firms are generating increased cash flow, he noted. "While there is no disguising the fact that the earnings season has, to date, contained more negatives than positives, the overriding sense is of a listed sector retrenching in the aftermath of the 1999/2000 bubble," Scott said.