European shares were mixed in thin volumes late yesterday, as takeover talk set the UK retail sector alight, offsetting falls in carmakers such as DaimlerChrysler after soft new-registrations data.
German industrials were hammered after engineering and gas group Linde warned of weak first-quarter earnings, as investors prepared for results due later this week from peer firms ThyssenKrupp and MAN.
A rampant euro continued to cast a pall over the market as investors mulled whether a tougher exporting environment and a slump in repatriated earnings would jeopardise the euro zone's embryonic recovery in profits.
Strategist Ian Scott of Lehman Brothers recommended investors boost their defences by selectively adding to the number of British stocks in their European portfolios, given the pound's 10 per cent dive against the euro so far this year. By 1543 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was flat at 814 points, while the narrower DJ Euro Stoxx 50 index had added 0.2 per cent.
Shares rose in London, Amsterdam and the Nordic region, were flat in Milan and Madrid, and fell elsewhere.
Wall Street helped European markets pull back from their lows, as the Dow Jones industrial average rose 0.9 per cent and the Nasdaq Composite added 1.2 per cent.
Trading volumes were well below average, as investors braced for a busy day of results.
Europe's biggest bank UBS, Italian peers Unicredito and Intesa, Spain's Telefonica, and UK pay-TV group BSkyB are among the blue-chip firms reporting today
After bouncing by more than 20 per cent from its six-year low in mid-March, the Eurotop 300 benchmark has been treading water within a narrow 20-point range since mid-April.
Some strategists hope credit markets will give shares an additional leg up in the short-term as the market's appetite for risk continues to improve.
If corporate bond yields keep on falling, reducing firms' long-term borrowing costs, that could provide shares with support in the face of potentially difficult economic data over coming weeks, said economist Matthew Wickens at ABN Amro.
Leading carmakers DaimlerChrysler and Volkswagen fell 1.5 per cent and 3.0 per cent, respectively, after data showed new car registrations in Germany - Europe's biggest auto market - fell four per cent in April.
Shares in Linde sank 4.7 per cent after the diversified gas and engineering firm's chief signalled first-quarter earnings would bear the brunt of weakness in its key German market.
Other economically sensitive German industrials such as Siemens, ThyssenKrupp and MAN fell between 1.9 per cent and 3.0 per cent each.
The DJ Stoxx retail index was easily the best-performing sectoral benchmark, gaining more than two per cent as mid-caps Selfridges and Debenhams sparked takeover talk among British retailers.
Selfridges surged 12 per cent after Canadian billionaire Galen Weston said he had agreed a cash offer for the British retailer worth 598 million pounds, even though news of a possible counterbid kept investors on tenterhooks.
Rival Debenhams said it had received a 1.5 billion pound management buyout approach. Its shares rocketed 24 per cent.
Elsewhere in the sector, Dixons ended up 5.47 per cent and Woolworths up 7.46 per cent.
Meanwhile, Telekom Austria rose 5.5 per cent after sources told Reuters that Swisscom was still sniffing out Austria's dominant fixed-line and wireless provider as a possible takeover target.
British television companies Carlton and Granada led media stocks down on concerns that passage of legislation seen as crucial for their pending merger had hit a snag in parliament's upper house.