European shares were treading water near the unchanged mark in yesterday's afternoon trade as an operation against suspected al Qaeda militants soothed security concerns, but patchy corporate results kept gains in check.
Wall Street weakened after the open while markets watched for volatility associated with the expiry of a number of futures and options contracts during the session.
News that Pakistani forces were bombarding a besieged group of up to 400 militants, possibly including Osama bin Laden's second-in-command, raised hopes of an improvement in global security.
Markets have been jumpy since the deadly train bombings in Spain last week and rumours of threats in recent sessions have undermined stocks and the US dollar.
Friday saw more sharp moves in currency markets following reports of a bomb threat to schools in the US capital.
The flow of European corporate results slowed but those still trickling out offered little encouragement for investors.
German department store operator KastadtQuelle fell 2.5 per cent after unveilling a fall in 2003 earnings, while European bourse operator Euronext was 2.4 per cent weaker after its net profit lagged forecasts.
By 1508 GMT, the FTSE Eurotop 300 index of pan-European blue chips was 0.1 per cent higher at 974.6 points while the narrower DJ Euro Stoxx 50 index slippded 0.2 per cent to 2,756.6 points.
"The last couple of weeks have given a lot of excuses to take profits and before that, one of the least comforting things about markets was that they had gone up more or less in a straight line since March 2003," said Simon Hallett, a fund manager at Barings Asset Management.
"Equities still look better than bonds for the next few months. Maybe later in the year we will have to consider if we go more defensive, but for now... the combination of valuation and momentum still tends to be in economically sensitive sectors."
While investors were nervous about the still poor performance of the US labour market, monetary policy would remain stimulative until it improved, he said.
"In terms of geo-political events, I don't think anything that happened last week has profound economic or valuation significance," he added.
In New York, the blue-chip Dow Jones industrial average was down 0.3 per cent at 10,266.0 points, while the Nasdaq Composite Index fell 0.4 per cent to 1,954.7 points.
In Europe, construction stocks were among the best performers, led by a 4.6 per cent gain for British housebuilder Persimmon, which spurred speculation it was looking for acquisitions after saying it had appointed a new broker.
Finnish food and chemicals firm Raisio rose 26.8 per cent after agreeing to sell its chemicals unit to Ciba Specialty Chemicals for €475 million.