European stocks closed weaker yesterday as Deutsche Telekom led telecoms lower and offset gains in handset maker Nokia, which rose on broker upgrades.

Standard Chartered fell 2.6 per cent as it trumped bigger rival HSBC and agreed to buy Korea First Bank, saying it would fund the acquisition with a £1 billion share placing.

"The placing hit the stock, and feedback from the analyst meeting was not positive," said one dealer.

The FTSEurofirst 300 index of pan-European stocks closed down 0.13 per cent at 1,055.1 points, having earlier hit a new 30-month high of 1,058.3 points after rising for two days in a row.

Markets are likely to take direction from a deluge of US earnings due this week, and investors will examine the figures especially for the impact of higher commodity costs and a weaker dollar.

"Sales numbers of European companies will give a pattern of how bad consumer spending has been, but the markets are still quite realistic," said a trader at a French brokerage.

Retailers will grab attention, with Carrefour releasing fourth-quarter sales figures today and German retailer Karstadtquelle updating the market on the same day.

French insurer AXA was Europe's top blue chip gainer, up 2.4 per cent at €18.8, near an 11-month high, as Merrill Lynch raised the stock to "buy" from "neutral".

Around Europe, the FTSE 100 index in London shed 0.28 per cent, and the German DAX eased 0.2 per cent. In Paris the CAC-40 was flat, and in Zurich, the SMI was off 0.06 per cent.

A rally on Wall Street helped markets pare losses in the closing session. The tech-laced Nasdaq jumped 0.82 per cent, and the Dow Jones industrial average put on 0.32 per cent ahead of fourth-quarter results from aluminium giant Alcoa, which were due after the close of US markets.

Tech bellwether Intel Corp presents its scorecard today, and Apple Computer reports results tomorrow followed by Sun Microsystems on Thursday.

Deutsche Bank said that though corporate earnings growth in Europe was likely to slow this year, growth remained solid and that European stocks were eyeing a 15 per cent upside this year.

"Investors seem concerned that earnings expectations are too optimistic, but our work suggests that they are reasonable if our economists are right that global growth will decelerate only modestly. If that is right, Europe stands on just 12-1/2 times 05 earnings," it said in a note.

The DJ Euro Stoxx 50 index slipped 0.09 per cent to 2,977.2 points.

Nokia added 1.5 per cent following broker upgrades from JP Morgan and Credit Suisse First Boston.

In the banking sector, merger and acquisition speculation pushed up Barclays 1.1 per cent after press reports that the UK bank had held merger talks with US peer Wells Fargo.

HVB was 2.6 per cent higher on talk Italian bank Unicredito might bid for Germany's second largest bank.

Deutsche Telekom led the fall in telecoms, down 1.7 per cent, as Morgan Stanley cut its rating on the stock to "equal-weight" from "overweight". Separately, Europe's biggest phone carrier announced plans to sell a euro-denominated bond to raise €3-4 billion to bolster its liquidity.

France Telecom fell 2.3 per cent.

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