European shares end mixed, Vodafone falls 4%

European stocks closed mixed yesterday as worries over oil prices due to tensions between Iran and Britain offset the impact of a relentless stream of mergers and acquisitions, while margin woes hit Vodafone.

Shares in the UK mobile phone operator fell 4.3 per cent as the company unveiled lower-than-expected UK profit margins.

The pan-European FTSEurofirst 300 index closed 0.08 per cent lower at 1,515.7, but has gained about two per cent in the first quarter amid increased volatility.

Across European exchanges, Germany's DAX rose 0.3 per cent and France's CAC 40 was flat on the day. US crude oil prices were up 0.4 per cent at $66.2 a barrel.

UK pharmaceutical chain Alliance Boots received a sweetened takeover offer as its deputy chairman and private equity firm raised their proposed bid to 1,040 pence per share from 1,000 pence.

The share rose as high as 1,046 pence but ended steady at 1,026.5 pence.

"Is it too good to be true? You feel a bit like that," said Andrea Williams, head of European equities at Royal London Asset Management, referring to the spate of mergers.

"Cash flows of companies are very, very strong and private equity firms are going into even bigger deals but you have to be cautious of headwinds coming in," she said, citing oil prices and worries of US consumer spending.

Spanish airline Iberia got a bid approach from Texas Pacific Group, in a move which analysts say could trigger other bids. The bid approach however came in at an indicated price of €3.6 per share, lower than Iberia's closing price of €4 on Thursday. Shares in Iberia ended flat at €3.99 yesterday.

German stock markets outperformed, led by banking stocks after the head of Citigroup in Germany told Reuters that the bank was on the lookout for acquisitions in Germany and had the financial muscle to buy a big bank.

Commerzbank and Deutsche Postbank both gained 2.2 per cent. Deutsche Bank rose 0.8 per cent.

LandesBank Berlin said investors were caught in a tug-of-war between a strong environment for equities in the eurozone and problems such as US growth and the Iran conflict.

"Volatility, including temporary stronger share price setbacks, is therefore likely to continue," LBB said in a note.

In the UK, home improvements retailer Kingfisher rallied three per cent following media reports that the private equity arm of Goldman Sachs was mulling a bid.

US stocks declined towards the close of European trading hours after the US government said it was slapping duties on imports of coated paper from China, raising concerns about a possible trade war that would hurt US exporters.