European shares end flat

European share indexes ended flat yesterday, just setting a new near five-year closing high, as lacklustre trade on Wall Street and a dip in oil stocks erased gains but miner Xstrata jumped on acquisition hopes.

European banking and construction shares rose on hopes US consumers will borrow more and invest in property if the Federal Reserve's monetary tightening campaign soon ends after slower-than-expected US April jobs growth on Friday.

Banks such as ABN AMRO and HSBC gained over one per cent while insurers were also strong.

The pan-European FTSEurofirst 300 index of leading shares officially closed 0.05 per cent up at 1,399.35 points having earlier touched 1,407.08, its highest since July 2001.

"Growth is extraordinarily strong. Interest rates are still relatively low and valuations are healthy," said Patrik Schowitz, global strategist at HSBC, who has a year-end target of 1,460 for the FTSEurofirst 300.

Expectations of an end to US interest rate hikes also helped push the MSCI World Index to a record of 349.28. Continually strong earnings and an increase in takeover activity have also buoyed stocks in recent months.

However, the Dow Jones industrial average in New York traded flat after jumping 1.2 per cent on Friday after the jobs data. Investors are awaiting the Fed's next rate meeting tomorrow.

UK-listed mining stocks rose in opening trade before falling back on profit-taking but Xstrata then leapt to a record high after the world's biggest zinc miner Teck Cominco said it will make a $16 billion offer for Inco.

Xstrata closed five per cent up having touched a record of 2,431 pence as Teck said its offer for Inco is conditional on Inco's takeover bid for Falconbridge being dropped.

Dealers said there was market speculation that Xstrata wants to buy Falconbridge, which would be seen as a positive for the company.

"It removes the risk of them (Xstrata) being outbid, or at least diminishes it massively," one dealer said, adding that the possible purchase of Falconbridge would transform Xstrata.

Other notable gainers included German pharmaceuticals trader Celesio which rose over four per cent after Deutsche Bank raised its rating to "buy" from "hold" while aerospace firm EADS gained over three per cent thanks to a Merrill upgrade.

Britain's FTSE 100 index, heavy in energy and resource stocks, underperformed the rest of Europe, falling 0.4 per cent or 25 points to 6,067.1.

Buoyant oil stocks dipped after crude futures, which hit record highs last month, sank over two per cent to $68.55 a barrel on hopes of a resolution in Iran's stand-off with the West over its nuclear ambitions.

BP, Total and Royal Dutch Shell all lost over one per cent.

Norway's Statoil added to the negative mood by falling 3.1 per cent after reporting a slightly smaller than expected jump in quarterly operating profit.