European shares flat in choppy trade

European shares ended little changed after a volatile session yesterday after upbeat earnings from the likes of Capgemini were offset by losses among banks after UBS revealed huge exposure to US mortgages.

The FTSEurofirst 300 index of top European shares ended up 0.1 per cent at 1,335.54, having risen by as much as 1.3 per cent earlier. The index is on course for its most volatile week since mid-2003.

The market fell in late trade after Federal Reserve chairman Ben Bernanke said the central bank would have to lower its projections for US growth and warned that more subprime-related write-downs at the investment banks were likely.

UBS shares were the biggest drag, falling by over eight per cent after the company shocked markets with $26.6 billion in exposure to risky US mortgages distinct from sub-prime loans, increasing its vulnerability to the global credit crisis.

UBS shares have fallen by nearly 30 per cent this year.

The broader European market rose earlier in the day, before Mr Bernanke's remarks, after strong earnings from Capgemini, Europe's largest computer consultancy, and Zurich Financial.

"Economic conditions in the US have worsened over recent months and credit conditions remain tight," said Steve Cleal, Morley's head of strategy and multi-asset funds.

"Equity markets are expected to remain volatile in the near term and for a sustainable recovery to emerge, investors will require signs that the US economy is beginning to respond to easier monetary conditions."

Among the banks, Commerzbank dropped 6.6 per cent after saying its bill from the subprime crisis crept up towards €800 million in 2007.

Royal Bank of Scotland fell 2.2 per cent, Barclays lost 2.4 per cent and Deutsche Bank fell 1.3 per cent.

Among gainers, Capgemini, Europe's largest computer consultancy, soared eight per cent after posting forecast-beating earnings and boosting its dividend.

Zurich Financial was among the top positive weights on the broader European market, rising 4.4 per cent after reporting earnings, while Swedbank rose 6.35 per cent after reporting better-than-expected results.

Energy shares were the top performing sector as crude oil prices rallied. Total added 1.1 per cent and BP rose 0.5 per cent.

Anglo American gained 2.3 per cent on a newspaper report suggesting that Rio Tinto could bid for the group. Rio declined comment.

French cement maker Lafarge rose 1.7 per cent and Dutch staffing company Randstad NV surged 5.1 per cent after its fourth quarter results beat expectations.