European shares ended little changed yesterday, within 10 points of a new five-year high, as weaker-than-expected US economic growth offset gains spurred by takeover talk and firm energy stocks.
Bid rumours whipped up buying in Spanish construction and services group Sacyr-Vallehermoso, German industrial conglomerate MAN, British insurer Royal & Sun Alliance and UK building materials company Hanson.
But weighing on the European equity market was a small sell-off in US shares, after a brief rise of the 110-year-old Dow Jones Industrial Average above its all-time record closing high attracted sellers seeking to lock in profits.
The pan-European FTSEurofirst index of 300 leading shares ended 0.06 per cent higher at 1,398 points, just shy of a near-five-year intra-day high of 1,407.52 struck in May. The index has gained two per cent in the past two days and is up nearly 10 per cent so far this year.
A report showing that the cooling US housing market had helped slow growth in the world's biggest economy more steeply than expected in the second quarter, capped sentiment - even though market players noted the data were backward looking.
US gross domestic product advanced at a revised 2.6 per cent annual rate in the April-June period, down from the 2.9 per cent estimated a month ago and nearly half the first quarter's 5.6 per cent rate.
This was also weaker than forecasts by Wall Street economists surveyed by Reuters, who had expected second-quarter GDP growth to be unchanged at 2.9 per cent.
"There was just a lot of minor downward revisions to GDP - it just made the number look marginally weaker. It is consistent with the direction we are generally seeing from other data, of further slowing in the third quarter," said David Sloan, senior economist, at 4Cast in New York.
In Europe, individual stock markets were mixed, with London's FTSE 100 up 0.7 per cent as firm oil and metals prices boosted heavily weighted energy and mining stocks.
Anglo American gained 2.2 per cent. A fund manager at Merrill Lynch Investment Managers said miners were "staggeringly cheap" after shares dropped while metals stayed strong, adding some of their earnings may beat expectations.
But the rest of Europe was weaker, with Paris's CAC 40 and the Swiss Market Index up 0.1 per cent and 0.04 per cent, respectively, while Frankfurt's DAX ended 0.01 per cent lower, weighed by a 5.6 per cent dip in Infineon shares.
The German chipmaker said the planned turnaround of its telecoms chips unit could be delayed after its main customer, BenQ Mobile announced yesterday that it would file for insolvency in Germany.
Takeover talk remained rife after Spanish property company Fadesa received a €4 billion bid from unlisted rival Martinsa. Fadesa shares leapt 18.8 per cent.
Also in Spain, Sacyr-Vallehermoso surged 8.8 per cent as traders cited speculation that ACS was looking at it.
A spokesman at ACS, which bought 6.3 per cent of Iberdrola earlier this week, said the company had nothing to do with Sacyr, adding: "I think it's time to calm down. The market's gone mad."
The Spanish market has been swept by takeover announcements and speculations in the past three days, pushing Madrid's IBEX 4.5 per cent higher.
General Motors Chief Executive Rick Wagoner said he was open to an alliance with Renault and Nissan, but made clear that talks might be extended beyond a mid-October deadline set by the carmakers.
Renault shares closed 0.8 per cent higher.