European shares edge lower

European share indexes closed down yesterday with GlaxoSmithKline weaker as manufacturing problems weighed on Europe's largest drugmaker, but a fall in oil prices and tech sector gains on Wall Street limited the overall slide.

Shares in the London Stock Exchange shed 7.8 per cent after Deutsche Boerse scrapped its proposed £1.3 billion bid, leaving rival Euronext as the sole party with a declared interest in winning control of Europe's largest equity market.

Shares in Euronext jumped to a life high and closed up 4.2 per cent on hopes it will avoid a costly takeover battle for the LSE, while Deutsche Boerse shares closed down 2.6 per cent.

The FTSEurofirst 300 index of pan-European blue chips closed 0.1 per cent weaker at 1,107 points, having touched a fresh 33-month peak of 1,109.5 points.

"The latest update of our funds flow-based sentiment indicator gives a neutral reading for stocks. This is consistent with a modest five per cent return over the coming 12 months," said Ian Scott, a strategist at Lehman Brothers.

"Given the low valuations and continued growth in earnings, we retain our bullish view on the market in spite of the neutral sentiment reading."

The broad DJ Stoxx European index ended down 0.1 per cent at 267.7 points on the fifth anniversary of its all-time peak of 408 points. This week also includes the anniversary of the Stoxx's all-time low - 162 points on March 11, 2003.

A one per cent retreat in oil prices helped the broad market and took some heat out of oil and gas stocks, but strategists at Dresdner Kleinwort Wasserstein remained upbeat on the sector, raising their global stance to "very overweight".

"High and stable oil prices make them a key play on the cash theme within the market," Dresdner said in a note.

Merger and acquisition activity and an upbeat profits outlook from wireless tech firm Qualcomm supported US stocks, with the blue-chip Dow Jones industrial average 0.4 per cent firmer at 10,982.9 points, and the Nasdaq Composite Index up 1.3 per cent to 2,097.6 points by 1716 GMT.

Both the Dow and the broad S&P 500 closed at their highest levels in almost 3-1/2 year highs on Friday following data showing stronger-than-expected jobs growth last month.

Around Europe, London's FTSE 100 closed 0.2 per cent lower, while Paris's CAC-40 ended up 0.4 per cent. Zurich's SMI and Frankfurt's DAX both closed 0.1 per cent higher.

GlaxoSmithKline closed down 1.2 per cent, adding to Friday's losses which followed news that US regulators had seized batches of two drugs due to concerns about product quality. Analysts estimated loss of revenues from the two drugs was set to lop at least two per cent off Glaxo's profits this year.