Strong telecoms kept European shares on an even keel yesterday as Deutsche Telekom rallied on relief it will not dig deeper into its pockets to buy out investors in its Internet arm.
Telekom gained 1.85 per cent after crushing hopes it might improve on its €8.99 offer to repurchase shares in T-Online, whose shares slumped 7.8 per cent to €9.
An upgrade by UBS to "buy" pushed France Telecom shares 1.3 per cent higher, while Spain's Telefonica gained one per cent on news it had approved a 25 per cent increase in its 2004 dividend, topping market expectations.
But autos were a sore spot as BMW sank two per cent on disappointing 2004 turnover, sending a shiver through the sector. DaimlerChrysler fell 1.1 per cent.
The FTSEurofirst 300 index closed flat at 1,054.81 points after rising to within striking distance of its 30-month high earlier this month. The DJ Euro Stoxx 50 index ended flat at 2,956.43 points.
"Companies are coming out with good numbers, but it's also the same old thing with concern about the US economy, the dollar, deficits and the oil price, and people are fairly cautious about top-line growth going forward," said Andrea Williams, head of European equities at Royal London Asset Management.
A jump in fourth-quarter sales and good outlook at Air Liquide, the world's biggest industrial gases company, was welcome, she said, as it was a bellwether of industrial demand generally, due to the group's broad customer base.
Shares in the French group rose 0.7 per cent. "We are trying to find areas exposed to capital investment such as media with advertising, and support services. Telecoms are fine, but we are less enthused about defensives, as food groups have problems with discounting," Mr Williams said.
Steady gains on Wall Street, which rose on good earnings from chipmaker Texas Instruments and drug group Eli Lilly, also helped put a floor under European shares.
US light crude hovering within sight of $50 a barrel also kept a leash on sentiment, but lifted heavyweight oil stocks such as BP. An unexpected improvement in Germany's Ifo business sentiment index this month was a relief for Europe's biggest economy.
Finnish handset maker Nokia was among the strongest blue chips, up 1.6 per cent ahead of its earnings report today.
Elsewhere, SAP shares fell 2.5 per cent as the world's biggest maker of business software said 2005 margins may stagnate despite growth in key licence sales.
"It could be worse. You do have top-line growth, but in the absence of a real driving factor for the market, investors react very sensitively to any newsflow that we get on margins or outlook," said ABN AMRO strategist Rolf Elgeti.
Allianz fell 1.8 per cent on news the German insurer's banking arm Dresdner would sell 17.2 million Allianz shares. Some analysts, though, welcomed the insurer's move to restructure its debt and reduce its exposure to equities through three capital market transactions totalling €4 billion.
Deutsche Boerse gained 2.9 per cent at €46.98 after Deutsche Bank raised its target on the stock to €54 from €47 in a bullish note to clients.