European shares ended flat yesterday as a lengthy recovery in the market begins to look stretched, but a rally in Swiss Re and weaker crude oil prices put a lid on the selling.

Swiss Re rose 2.4 per cent to 75.10 Swiss francs after a stock rating upgrade to "overweight" at JP Morgan bank.

The insurance sector was also bolstered by domestic peer Swiss Life which beat market expectations with a sixfold increase in first-half net profits, sending the stock up 0.7 per cent to 149.5 Swiss francs.

Investors took money out of mining sectors amid talk that China may take further steps to cool its economy, which has been a key consumer of metals and steel.

The FTSE Eurotop 300 index ended down 0.14 per cent at 991.32 points, having risen in 11 of the past 16 sessions.

Since hitting a new 2004 low in the middle of last month, it has rallied six per cent, leaving it just 3.8 per cent away from its best levels of the year, but volume remains light with barely two billion euros traded yesterday.

"The volume is still pretty thin, which I would say is a major problem, but the market is looking better," said Udo Becker, a dealer at Merck Finck private bank in Munich.

"In August we still struggled with terrorist worries and high oil prices," Mr Becker said, adding that these two concerns had now eased, helping markets drift higher.

"Many people missed buying at the bottom and now they are hesitating about jumping into the market," Mr Becker said.

There was nervousness at how fast markets have recovered from their lows, and caution ahead of testimony on the US economy today from Federal Reserve Chairman Alan Greenspan.

"There are clear downside risks to stocks if global growth continues to roll over. However, in our view, a sustained drop in energy prices could take the brake off consumer spending to the benefit of stocks over bonds," said Trevor Greetham, director of global asset allocation at Merrill Lynch investment bank.