European shares were mixed yesterday afternoon as investors turned to defensive drink and cigarette groups but dumped Nokia after the cellphone giant's second profit warning in as many weeks.
A weak start on Wall Street also weighed. The market is dogged by worry the Federal Reserve will raise US borrowing costs soon, triggering a move into defensive plays like drinks and tobacco that offer a safer haven by offering more predictable earnings and dividend yields.
UK drinks group Diageo led the blue-chip advancers, its stock gaining four per cent. Among the tobacco groups Gallaher rose 2.9 per cent, while Imperial Tobacco advanced 2.3 per cent. British American Tobacco was up 1.7 per cent, hitting its highest level for the year.
The drug sector, another defensive area, was also fuelled by a 4.5 per cent jump in German group Merck after an industry source told Reuters it was in acquisition talks and could announce a deal as early as the end of the month.
The stronger dollar also helped exporters like drug firms because they have a large presence in the US market.
Ultra defensive utility stocks were also among the strongest with E.ON and Suez leading the way, and cosmetics giant L'Oreal also strong.
By 1406 GMT, the FTSE Eurotop 300 index was up 0.12 per cent at 1,009 points. Some three issues rose for each two that fell with volume slightly above the daily average.
The narrower DJ Euro Stoxx 50 index eased 0.2 per cent to 2,849 points.
Mobile phone maker Nokia warned of another tough quarter as cheaper, funkier phones from competitors eroded market share.
"It does not look good. It is obvious that they are losing market share on mobile phones, and the guidance indicates that next quarter will be worse than we expected," said analyst Urban Ekelund at Swedish market research group Redeye.
Nokia posted January-March EPS of €0.17, in line with a warning from April 6, and said second-quarter earnings per share would be €0.13-0.15, well below expectations of €0.18.
As Nokia shares sank 10.7 per cent, those in rivals Ericsson and Siemens both edged up.
Meanwhile, investors continued to scrutinise US economic data for clues on when the Federal Reserve will likely raise interest rates.
US housing starts surged ahead of expectations in March as the economy grows vigorously.
However, the closely-watched University of Michigan's preliminary April index of consumer sentiment came in at 93.2, below expectations of 96.5, helping to ease some of the interest rate worry.
On Wall Street, the Dow Jones industrial average was flat at 10,395 points, while the tech-studded Nasdaq Composite shed 0.7 per cent to 1,987 points.