European shares closed flat yesterday and likewise for the week as investors paused after months of driving bourses to near 17-month highs in anticipation of the generally solid earnings news being released.
There were some pockets of activity as fresh merger talk gripped pharmaceuticals, with French drugmaker Aventis hiring investment banks to prepare for an expected $60 billion bid from domestic rival Sanofi-Synthelabo.
Sanofi shares sank seven per cent to 57.7 euros, while Aventis rose 1.7 per cent to 57.5 euros.
Italian banks were also active, gaining on continued speculation of foreign takeovers despite denials from Dutch ABN AMRO and Italy's Capitalia of a report that the former was studying a buyout of the latter.
German banks like Deutsche Bank and HVB rose as bankers and officials talked up the prospect of a foreign bid for a German bank or a domestic merger.
The overall market's pause comes at a time when the euro's strength is a cause of concern for investors in currency sensitive shares like automakers that export to the US.
The euro was trading at $1.26 as bourses shut, about three cents from its recent record high, but analysts said breaching the "pain barrier" of $1.30 was only a matter of time, despite efforts by ministers to talk it down.
Investors looked to the Federal Reserve Open Market Committee meeting next week for new impetus, and although no change in US interest rates is expected, any comments from the central bank will be seized on.
"There is a palpable sense of the markets waiting with baited breath for some directional leads from next week's FOMC and what kind of new spin, if any, the Fed may throw on US rate policy," Bear Stearns Chief European economist David Brown said.
The FTSE Eurotop 300 index ended 0.15 per cent down at 992.33 points after a near 17-month high on Thursday. For the week, the benchmark is little changed, but up 3.5 per cent for the year.
"The market is just running out of steam and regrouping a little bit," said Mark Tinker of Execution stock broker.
Investors placed their cash in the market early in the year in anticipation of good earnings, sending shares higher, but now they are taking some profits, he said.
"The market has not come back far enough to get the long-term value investors back in. We are due for a little pullback and it looks like it could be starting," Mr Tinker said.
Wall Street has also largely been rangebound as the quarterly reporting season gears up for another 200 top companies next week, though dealers say much of the good earnings news is already factored in.