European shares were mixed yesterday as a rally in tech stocks, inspired by a rebound in Nokia, was offset by declines in the energy and telecoms sectors.
The market drew solace from a steadier start on Wall Street, where stocks rose after the release of data showing the US services sector, which accounts for two-thirds of the economy, expanded in May at its fastest pace since August 2000.
Investors have been loathe to react a string of positive data in recent weeks, preferring to wait for the start of the reporting season in July to confirm that the economic recovery is translating into better bottom lines.
"The macro data is better-than-expected, but the market was fooled by that half-a year ago and they are not looking to be trapped again. They are waiting for second-half results," said Gert-Jan Geels, fund manager at Eureffect Asset Management in Amsterdam.
At 1545 GMT, the FTSE Eurotop 300 index was off 0.7 per cent at 1,137 points. The index is at its lowest level since last October, having wiped out a hefty chunk of the post-September 11 stocks recovery.
The narrower Euro Stoxx 50 of Europe's 50 biggest companies rose 0.2 per cent.
On Wall Street, the Dow Jones industrial average climbed 0.2 per cent to 9,700 points, while the tech-studded Nasdaq Composite lost 0.9 per cent.
"The Dow is up and that's cautiously encouraging. We would hope for the Nasdaq to close maybe one per cent higher and then maybe we will be courageous enough to go higher in Europe again tomorrow," Geels said.
Tech shares recouped some of their recent losses as Finnish phone giant Nokia rallied 2.1 per cent on hopes that the share, which hit a three-year low on Tuesday, has bottomed for the time being.
The gain nudged Europe's technology sector up 1.0 per cent. French IT services firm Atos Origin contributed to the rise by rising 1.6 per cent after announcing it would buy KPMG's UK and Dutch consulting operations for 657 million euros.
With earnings visibility poor, wary tech investors are looking to global chip bellwether Intel to provide clues on its prospects when it unveils its mid-quarter update on Thursday.
Martin Brooker, a strategist at E*Trade Securities, said that while the first and second quarters were seasonally weak periods for chip manufacturers, Intel could provide a slightly improved outlook for the third quarter.
"We should expect a little bit better in terms of guidance, which should add a bit of support because we're looking at a very oversold market," Brooker said.
European oil shares were among the day's poorer performers after the American Petroleum Institute released data showing a surprise jump in crude oil stocks, providing US motorists with a big cushion for peak summer vacation driving demand.
Among the oil majors, BP dropped 3.4 per cent, while Shell fell 2.8 per cent. July crude oil futures in London were down 1.6 per cent at $24.06 a barrel.
Telecom stocks were undermined by a Financial Times report quoting Ericcson Chief Executive Kurt Hellstrom as saying demand for telecoms equipment may not improve next year.
Among the sector's big losers on the day were British mobile phone group mm02, which lost 4.7 per cent, and Europe's biggest wireless firm Vodafone, which shed 3.4 per cent, tugging the DJ Stoxx Telecoms index down 1.9 per cent.
Widely held France Telecom and Deutsche Telekom both set year-lows of 18.53 and 10.90 euros respectively.
Telecom Italia bucked the trend, rising 0.8 per cent after rating agency Standard & Poor's upgraded its outlook on the firm to positive from stable and affirmed the company's ratings.
Insurance stocks were also under the cosh after investment bank Morgan Stanley cut its ratings and price targets for leading European insurers.
Morgan Stanley said plans to reform Britain's pensions industry might hit stocks such as Legal & General and Prudential and added it had longer-term concerns about European life insurance liabilities.
Prudential shed 2.3 per cent and Legal & General sank 2.6 per cent. German insurer Allianz shrugged off the note and rose 1.1 per cent.