European shares end flat as drugs rise, techs slide

European shares ended flat yesterday as Novartis's rally boosted drug stocks, offsetting a lacklustre performance from technology firms such as Nokia and resource heavyweights.

Steelmaker Arcelor jumped as investors continued to hope Mittal may raise its bid, while Sweden's Volvo, British Airways and Norway's Norske Skog tumbled as their earnings or outlooks disappointed.

"What we've seen in Europe is more or less in line, but I don't think we'll have such a big number of upgrades," Martin Sirch, fund manager at HSBC Trinkaus in Dusseldorf said of European earnings reports.

"It's widely expected that growth will come down, in almost all sectors you have earnings momentum coming down. A slowdown in earnings growth is expected and is very possible."

The pan-European FTSEurofirst index of 300 leading shares closed up 0.04 per cent at 1,320.29, with Wall Street failing to inspire as the Dow Jones lost 0.3 per cent and Nasdaq fell 0.8 per cent.

Despite ticking up to fresh four-and-a-half-year highs earlier in the week, the European market is broadly flat for the week and still up three per cent for the year-to-date.

"Overall, I think we're in the second leg of a bull market, there's an above even chance that the whole market could get rerated by 15-20 per cent," said Mark Tinker, ICAP equity strategist.

"If you buy the right stocks you don't have to rely on that re-rating to get a positive total return but you will be exposed to that at the same time."

Novartis gained 1.9 per cent after saying it would propose a 10 per cent dividend increase for 2005. The DJ Stoxx European healthcare index rose 0.8 per cent, with Shire adding 2.1 per cent.

Nokia fell 0.6 per cent after Nippon Telegraph and Telephone Corp. (NTT) - the world's largest telecomms group by revenue - reported a 26 per cent drop in quarterly profit.

Technology was Europe's leading sectoral loser with a 0.6 per cent slide.

Among resource stocks, BHP Billiton lost 0.9 per cent, with Antofagasta down 0.6 per cent despite copper trading above $5,000 a tonne.

Arcelor added 4.1 per cent after sources said Mittal has filed the prospectus for its $23 billion bid and the takeover target said there was no hope of a white knight appearing to fend off the hostile offer.

The world's second biggest truckmaker Volvo tumbled nine per cent as it posted an unexpected drop in fourth-quarter pre-tax profits.

British Airways fell 2.6 per cent after Europe's third-largest airline beat expectations with a 29 per cent rise in third-quarter profit but warned that a strike by ground staff in August had pushed up costs.