European stocks end touch lower in trendless market

European shares closed a shade lower in a trendless market yesterday, with robust gains for miner Rio Tinto and retailer Carrefour offset by losses for some heavyweight oil, telecoms and bank stocks.

The benchmark FTSEurofirst 300 index of top European shares eased 0.01 percent to 1,597.74 points. The index reached its highest level since late 2000 on Thursday but ended the week with a loss of almost 0.2 per cent.

Some market watchers said European equities could be facing a near-term downward correction, particularly if investors revert to the strategy of "sell in May and go away".

"We are expecting a distinct consolidation in stock markets in the near term, in the course of which share price setbacks of around 15 percent would not surprise us," said Heinz-Gerd Sonnenschein, strategist at Germany's Postbank.

Helaba, another German bank, forecast that the the DJ EuroStoxx 50 index would sink to 4,000 points by the end of this year's third quarter, a loss of 10 percent.

Rio Tinto rose 4.1 per cent yesterday as metal prices firmed and on persistent merger and acquisition talk.

"Rio Tinto and other miners are up today ... because metal prices are rallying," a trader said. "The speculation of Rio involved in some corporate activity is not going away."

Copper prices rose three per cent, zinc added 2.5 per cent and nickel climbed 3.3 per cent.

The DJ EuroStoxx basic resources index, which includes mining stocks, was the day's top sectoral performer in Europe with a rise of 1.1 per cent.

Renewed takeover talk also lifted Carrefour, the world's second-largest retailer, by 2.3 per cent, traders said. Earlier this month, the stock rallied on talk of a leveraged buyout. Rival Metro put on 1.9 per cent.

DaimlerChrysler rose 1.8 per cent, with analysts saying investment funds bought into the stock following the carmaker's agreement to sell most of its struggling US arm, Chrysler, to buyout group Cerberus.

Outside the blue-chip companies, shares in Nordic stock exchange operator OMX jumped 11 percent after US Nasdaq agreed to buy it for $3.7 billion.

"Strategically, this deal makes sense," WestLB said in a note, raising its target price for OMX to 208.1 Swedish crowns - the value of the Nasdaq bid - from 190 crowns.

Among other European bourses, Spain's BME climbed 3.6 per cent, Germany's Deutsche Boerse advanced 1.8 per cent and London Stock Exchange rose 1.1 per cent.

The price of London crude fell below $71 a barrel, hurting oil majors such as Royal Dutch Shell and BP, both of which fell 0.3 per cent. The sector index also lost 0.3 per cent. Telecommunications stocks dropped 0.5 percent with Telefonica down 0.5 per cent, Vodafone 0.4 per cent lower and France Telecom losing 0.3 per cent.