Cellphone maker Nokia helped push European stocks up in thin holiday trade yesterday, but gains were capped by worries about higher crude oil prices.
Much of Europe observed a public holiday yesterday, although markets in Germany, France, the Netherlands, Belgium, Spain, Finland and Italy were open as normal. London, Europe's biggest equity market, was shut.
The FTSE Eurotop 300 index added 0.25 per cent to 986.44 points, about four per cent below its 2004 high point.
European markets have struggled to make much headway in the past three months as they battle against forecasts that US interest rates are set to rise and in the face of high raw material costs.
Lacklustre markets have been mirrored by a slowing of inflows into European equity mutual funds.
"The momentum seems to have slowed in the last several months," said Michael Quach, a strategist at CSFB.
"In the near term, we are unlikely to see much of a pickup, given the historic pattern of investor activity over the summer months. We may have to wait until the last quarter of the year for any significant return from the retail investor."
Oil majors were buoyant on expectations that the price of crude oil would rise when key markets reopen from a long holiday weekend after a second attack in less than a month in Saudi Arabia, the world's top crude exporter.
Analysts doubted US crude oil prices would soon break new ground above the recent 21-year peak at $41.85 a barrel, but added that the attack in the oil hub of Khobar served as a sharp reminder of the vulnerability of already-stretched global supplies.
The prospect of sustained high crude oil prices raises earnings expectations for oil producers.
Shares in France's Total rose 0.9 per cent to €155.1, and in the Netherlands Royal Dutch climbed 0.6 per cent to €41.25.
The world's biggest mobile phone maker, Nokia, added 2.2 per cent to €11.4 after the Financial Times reported that the company had clawed back market share in Europe in recent weeks after cutting prices.
Nokia launched a new camera phone yesterday aimed at the mass market and won a $50 million deal from Indonesia's Indosat to upgrade and expand the company's mobile network.
Meanwhile, French engineering firm Alstom jumped 11.7 per cent to €1.05 after all seven of its creditor banks backed a capital increase and contract guarantees that it needed to win new business.
"It's a bit of a relief rally now that all the seven banks have agreed to support the capital increase and contract guarantees for Alstom, but the main question now is, how big a dilution the capital increase is going to have, and at what level it's going to be priced?" a Paris-based trader said.
Shares in Fiat closed above its session low after a financial source said Sergio Marchionne, an independent member of Fiat's board, was the front runner to take over as CEO.
Fiat's board will meet today at 1200 GMT to pick a new CEO after Giuseppe Morchio resigned late on Sunday.
Fiat declined to comment. Among the day's other stand-outs, shares in Bank of Ireland rose four per cent to €10.08 after the sudden resignation of its chief executive at the weekend prompted speculation of a takeover.
The bank's CEO, Michael Soden, stepped down after saying he had breached company internet policy by accessing adult material on his office computer while on company time.