European stocks closed mixed yesterday as concerns the European Central Bank is turning more hawkish offset gains by shares including Vodafone and BT based on renewed takeover talk.

German insurer Allianz also weighed after posting mixed earnings, while oil majors such as Total edged down with crude extending its fall after Wednesday's big US fuel inventories increase.

The FTSEurofirst 300 index of leading European shares unofficially closed 0.03 per cent up at 1,368.86, having climbed for the past five sessions to levels last seen in July 2001.

Bourses were helped late yesterday by a rise in the Dow after US CPI came in tamer than expected but the perceived soothing of US inflationary pressures was overshadowed by investor fears about Europe's growth prospects.

MNSI reported European Central Bank sources saying the bank is aiming to raise interest rates to a neutral level as the economy strengthens and inflation risks persist. The timing was open, they said.

"With rate markets still pricing less than 50 per cent odds of a hike in May, and reflecting projections for three-month rates below 3.5 per cent by year-end, the story keeps perceptions of ECB risks to the upside," said UBS strategist Daniel Katzive.

Norway's central bank raised interest rates by a quarter point to 2.5 per cent yesterday and stuck to plans for further rises in "small, not too frequent steps", while the Swiss National Bank increased rates by 25 basis points as expected.