European shares ended a downcast week on a bright note yesterday, with hopes for strong earnings lifting Germany's Allianz and other insurers, but a late gain in oil prices and data showing a wide US trade gap weighed.
Merger and acquisition activity boosted the transport and leisure sector, with airline Swiss soaring 20 per cent on talk of a tie-up with Lufthansa and UK leisure group Whitbread up 7.7 per cent after saying it was in talks to sell all of its luxury Marriot UK hotels.
The FTSEurofirst 300 index of pan-European blue chips closed 0.2 per cent firmer at 1,087.2 points but still ended down 1.8 per cent for the week after closing lower for the previous four sessions.
The narrower DJ Euro Stoxx 50 index also rose 0.2 per cent, to 3,060.4 points.
Stocks wobbled after data showed the US trade deficit swelled to $58.3 billion in January, sending the dollar to fresh two-month lows against the euro and rekindling worries about a faster pace of US interest rate hikes.
"The numbers remain at levels that are not favourable to economic growth and the direction of the dollar, but some components like oil imports are likely to improve in next weeks as the winter draws to an end," said economist Valerie Plagnol at CM-CIC Securities in Paris.
A weaker dollar is a negative for European exporters and for multinational companies that have a high proportion of US dollar sales but report in another currency.
The data hit US stocks, with the blue-chip Dow Jones industrial average 0.3 per cent weaker at 10,823.2 points, while the Nasdaq Composite Index was down 0.5 per cent to 2,048.8 points by 1716 GMT.
Crude prices spent much of the day around $53 a barrel but rebounded late in the session above $54, highlighting the risks of rising input costs for many companies.
Around Europe, London's FTSE 100 and Zurich's SMI closed 0.4 per cent higher, while Paris's CAC-40 ended up 0.3 per cent. Frankfurt's DAX closed 0.5 per cent firmer.
German insurer Allianz closed 2.4 per cent higher ahead of its fourth-quarter results next week. Merrill Lynch added Allianz to its list of top European picks yesterday, saying the company's balance sheet had improved and estimates on its earnings could rise.
Swedish telecoms equipment maker Ericsson led modest gains in the tech sector, adding 1.4 per cent in the wake of leading chipmaker Intel Corp, which raised its sales and margin forecasts on Thursday.
News that China Mobile raised its capital spending guidance was also seen supporting Ericsson, dealers said.
Basic resource stocks, which have benefited from soaring commodity prices in the past year, were mixed.
"Profit-taking in commodity stocks is tempting, but looking at current valuation and earnings momentum, we would tend to focus on (selling) metals rather than miners, drillers rather than integrated oils," said Mark Tinker, head of strategy at independent broker Execution.
Oil drillers Saipem and Technip and metal plays Lonmin and Anglo American looked expensive and vulnerable, Mr Tinker added.