European shares ended little changed yesterday as merger activity and a retreat in oil prices helped to offset cautious comments by Barron's weekly on technology bellwether Ericsson and a weak telecom sector.
Shares in Swedish industrials Volvo, SKF, Sandvik and Atlas Copco stood out after US equipment rental group United Rentals said its 2004 results will meet or exceed previous forecasts.
But index heavyweight Vodafone fell as a placement in newly-renamed mobile phone operator O2 lured money from elsewhere in the telecom sector.
Meanwhile, London Stock Exchange shares slipped 3.2 per cent to 477 pence after a shareholder in Euronext, its only remained declared suitor, said all major investors in the exchange opposed a bid "materially above" 400p per share.
By 1645 GMT, the FTSEurofirst 300 index fell 0.09 per cent to 1,086.3 points, while the narrower DJ Euro Stoxx 50 index inched 0.06 per cent higher to 3,062.1.
Some investment banks such as Credit Suisse First Boston said they were becoming more cautious on equities, citing valuation concerns in the United States. But European markets continue to be viewed as a good investment in the short-term, as shown by a Reuters poll of funds of hedge funds.
The FTSEurofirst has fallen off recent 33-month highs but still shows gains of 4.3 per cent for the year so far.
Helping sentiment yesterday was a fall in oil prices after Saudi Arabia called for OPEC exporters to raise output by half a million barrels per day to stem soaring global energy costs.
Signs of renewed corporate activity also drove investors into the market, after Germany's Lufthansa ended months of takeover speculation by saying it wanted to buy Swiss International Air Lines.
"It is a good deal for both Lufthansa and for Swiss," said Nick van den Brul, analyst at Exane BNP Paribas. Lufthansa shares ended 1.5 per cent up but those of Swiss trimmed earlier gains to end 0.5 per cent lower.
On the downside, Swedish telecom equipment maker Ericsson fell 0.5 per cent after Barron's financial weekly said the company's margins and share price may have peaked.