European stocks ended mixed yesterday after trading in a tight band, but automaker DaimlerChrysler rallied nearly three per cent on market talk it might soon announce a sale of its Chrysler unit.

The pan-European FTSEurofirst 300 index closed 0.08 per cent lower at 1,509.0 but outperformed US stocks, which were hit by a consumer confidence report and housing worries.

The index has gained nearly two per cent so far this year, after sliding nearly eight per cent in a week beginning February 27, when Chinese stock markets led global shares lower.

Among losers, Barclays fell two per cent on a day its president said the UK bank was in a strong position in its talks on an $80 billion takeover of Dutch rival ABN AMRO.

Some analysts have voiced concerns about Barclays overpaying. Shares in ABN also shed one per cent but were near lifetime highs.

Earlier in the day, a stronger than expected German business climate index supported markets.

German business morale unexpectedly rose this month as the impact of a new year rise in value-added tax appeared to fade.

"This to me confirms that the European economy continues to be quite strong even with a slowdown going on in the United States. So that's positive, so this could continue to further support stocks," said Philip Gijsels, senior equity strategist at Fortis Bank, in Brussels.

Around European markets, London's FTSE 100 index ended flat, Frankfurt's DAX rose 0.4 per cent and Paris's CAC-40 gained 0.2 per cent.

Autos were the top gainers, with DaimlerChrysler taking pole position amid market talk that the carmaker might announce a divestment of its US Chrysler Group as early as this week, traders said.

The sector also benefited from various share price target upgrades. Morgan Stanley raised DaimlerChrysler's price target, while Porsche extended its recent rally and jumped seven per cent on upbeat broker comments.