European stocks end higher as Ericsson offsets NY

European shares closed higher yesterday but below fresh five-year highs as Wall Street weakness took the wind out of an earlier rally fuelled by Ericsson and by takeover talk in the airline and property sectors.

Iberia rose 1.3 per cent on renewed market rumours about a possible bid by British Airways, while UK property firm Hammerson also gained 2.6 per cent on resurging bid speculation.

Shares in Anglo-Dutch steelmaker Corus, which has gained 30 per cent in the past six weeks, failed to sustain its prolonged takeover-fuelled rally.

India's Tata Steel earlier announced it agreed to buy Corus in a £4.3 billion cash offer.

The pan-European FTSEurofirst 300 index added 0.29 per cent to close at 1,445.39, its highest close since June 2001 but below a session high of 1,450.53 points, and bringing to 0.3 per cent its gains for the week.

The index is up 13.2 per cent so far this year, spurred by booming merger activity and strong earnings. But investors could become more cautious in coming days as they brace for a deluge of corporate results and a US interest rate decision.

"The key will be what they (Fed) say rather than what they do. Critically, the markets will want to see what semantic stress the Fed lays on the balance of risks between growth and inflation, for implied rate policy intentions ahead," Bear Stearns economist David Brown said in a note.

"The implied policy bias is still tilted towards higher rates considering the high prevailing level of US core inflation."

Around Europe, London's FTSE 100 index ended flat, while Paris's CAC 40 and Zurich's SMI gained 0.3 per cent and Frankfurt's DAX added 0.4 per cent.

Earnings disappointments pushed Wall Street into the red, explaining a halving of European stock market gains in the later part of the trading session. Dow component Caterpillar posted a shortfall in quarterly profit, outweighing the impact of Google's higher-than-expected profit.

But European equities managed to stay in positive territory, helped by Ericsson, the Swedish telecoms equipment giant, which gained 2.2 per cent after upbeat broker notes from Lehman Brothers and Prudential.

Lehman Brothers said Ericsson's third-quarter results, released on Thursday, were roughly in line for the core business, while upside was driven by very strong performance at Sony Ericsson.

Siemens was another strong performer, up 2.7 per cent. The German industrial conglomerate said it was moving its electronic health card and IT security business to its medical division from its dwindling telecoms unit, Com.

Siemens said the move would bundle its expertise in healthcare telematics in its thriving Med unit, confirming what company sources had said last month.