Europe's leading shares were mixed in late trade yesterday as banking stocks diverged, with BNP Paribas heading the fallers after the French bank bought a costly stake in Credit Lyonnais.
Gains in Italy's Banca Nazionale del Lavoro and Capitalia, Spain's BSCH, and Dutch bancassurer ING helped haul Milan, Madrid, and Amsterdam into positive terrain.
Nordic stocks also edged up as buyers nibbled away at Finnish mobile phone giant Nokia, but losses elsewhere kept pan-European benchmark indices depressed.
By 1643 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 0.65 per cent at 933 points, and the narrower DJ Euro Stoxx 50 index fell 0.35 per cent to 2,638 points.
Trading volumes were light and dealers said the market was crying out for direction.
"The market has had a very good rally from an oversold position, but it now needs to consolidate and may even drift lower, until we see something tangible to justify another leg-up in prices," said Nigel Cobby, managing director for European equities at JP Morgan.
The Eurotop 300 benchmark is about 19 per cent above the intraday five-and-a-half-year low hit on October 10.
Cobby said global economic data now needed "to completely remove the fear of a double-dip recession".
He singled out the ISM US business sentiment index for December due next week for special attention. But with the German Ifo survey due on Tuesday along with November US consumer confidence data, and US durable goods orders and other data to follow, Cobby said there was still plenty of news this week for investors to ponder.
"Volumes could be affected by the US Thanksgiving Holiday on Thursday, but it's still an important week in terms of economic data and could set the trend," Cobby said.
On Wall Street, the Dow Jones industrial average was 0.13 per cent weaker while the tech-heavy Nasdaq Composite rose 0.17 per cent.
French banks hogged the spotlight after the euro zone's biggest bank by market capitalisation, BNP Paribas, snared the French government's 10.9 per cent stake in Credit Lyonnais in an audacious weekend move that opens the door to a bidding war for the country's fourth largest bank.
Credit Lyonnais shares soared by a fifth as investors cheered the prospect of a vigorous takeover battle. BNP Paribas sank 7.57 per cent.
Lloyds TSB and Abbey National also slid, falling 3.89 per cent and 3.14 per cent respectively, after credit rating agency Standard & Poor's cut its outlook on both British banks to "negative" from "stable", citing continuing pressure on group capital flexibility from market volatility.
Traders said there was also some nervousness ahead of Abbey National's trading update tomorrow.
Shares in Royal & Sun Alliance shed 6.21 per cent to 132.5 pence after Schroder Salomon Smith Barney cut its price target on the stock to 100 pence from 120 pence, saying there were big risks in the troubled UK insurer's strategy of bringing in money through disposals rather than a rights issue.
But Italy's Capitalia jumped a further 5.98 per cent, having gained some 21 per cent over the previous five sessions amid expectations of a quick sale of its German direct bank Entrium.
The continued rise prompted some fund managers to speculate on whether someone was building up a stake in the group ahead of a review of its shareholders' pact on December 6.
The DJ Stoxx index of food and beverage stocks headed the sectoral fallers with a drop of 1.42 per cent after Credit Suisse First Boston rejigged its industry ratings.
The investment bank cut its recommendation on Anglo-Dutch consumer goods giant Unilever to "underperform" from "neutral" and demoted Switzerland's Nestle to "neutral" from "outperform".
But KPN leapt by seven per cent as traders whiffed a chance that the Dutch telecoms company might get a good price for its stake in Cesky Telecom after the Czech cabinet again failed to vote on the sale of its own 51-per cent stake.