European blue chips turned flat in late trade yesterday after weaker-than-expected US business sentiment helped deflate investors' hopes for a decisive pick-up in the fragile global economy.
"There was some genuine enthusiasm built up last week after the strong Chicago PMI and durable goods orders, but we've fallen flat on our faces with this week's first big number," said David Thwaites, pan-European strategist at BNP Paribas.
Heavily-weighted financial stocks featured strongly. German banks HVB and Commerzbank led the climbers on continuing speculation of a merger between the two, while BNP Paribas was among the top fallers after the French bank upped its investment in Credit Lyonnais.
By 1654 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index was up 0.09 per cent at 940 points, having been almost two per cent higher in earlier trading when the benchmark almost scaled three-month highs.
The Eurotop 300 is up more than 19 per cent from its five-and-a-half-year intraday low on October 10 amid growing hopes that a protracted bear market may finally be over.
Investors are looking to the European Central Bank to reinforce those hopes on Thursday by cutting interest rates to help kick-start the flagging euro zone economy.
Trading volumes were average, with falling stocks outnumbering risers by about four-to-three.
The euro zone DJ Euro Stoxx 50 index rose 0.25 per cent to 2,663 points, but benchmark indices in London, Paris, Milan and Amsterdam ended down.
On Wall Street, the Dow Jones Industrial Average slipped 0.2 per cent, while the tech-heavy Nasdaq Composite was up 1.1 per cent.
Europe's biggest bank by market cap, BNP Paribas, scooped up another 5.32 per cent of rival Credit Lyonnais, fuelling speculation over Lyonnais's future after France's BNP bought a 10.9 per cent stake in Lyonnais a week ago.
That hurt BNP shares, which fell 3.2 per cent as investors fretted over the high cost of the exercise, while shares in Credit Lyonnais rose 3.5 per cent.
The merger mania was just as pronounced in Germany. Market participants cited renewed speculation that Commerzbank and HVB group might be forced into a merger as both banks added around nine per cent each.
Shares in Deutsche Telekom rose 4.5 per cent after the group said it was placing around 100 million shares in its T-Online Internet service provider, which should raise about 610 million euros to help cut the German telecoms operator's mammoth 64 billion-euro debt.
Deutsche Telekom shares rose 6.3 per cent, while T-Online advanced 12.7 per cent on talk the extra stock was being soaked up quickly.
Technology shares headed the sectoral leaderboard, hauled higher by top mobile phone maker Nokia after investment bank Merrill Lynch raised its rating on the stock to "buy" from "neutral" and set a target price of 24 euros.
Nokia shares rose 3.8 per cent as its year-end strategy meeting got underway in the United States.
French telecom gear rival Alcatel surged 8.7 per cent. But oil stocks came under pressure after Morgan Stanley cut its stance on European integrated oil companies to "cautious" due to a deteriorating outlook for 2003.
Sector leader BP shed 1.4 per cent, while TotalFinaElf dropped 1.55 per cent.
Shares in Dutch insurer Aegon fell 3.08 per cent after investment bank Fortis lowered its recommendation on the stock to "accumulate" from "buy".
The closely watched US Institute of Supply Management index rose to 49.2 in November from 48.5 in October but economists had expected it to improve to 51.3.
An ISM figure below 50 is still consistent with a contraction in manufacturing activity.
"Let's hope the ISM service sector and non-farm payrolls data later this doesn't disappoint as well," said BNP's Thwaites.
Sentiment earlier got a boost by news that the Reuters Eurozone Purchasing Managers' Index had risen for the second month running to slightly above consensus estimates.
Economists were cautiously pleased with the number but emphasised that the economic climate remained fragile.