European blue chips were mostly down but well off their lows in late trade yesterday, as a flat performance on Wall Street helped steady investor nerves after surprisingly soft US employment data had pummelled sentiment.
But volumes were below average, and France Telecom pushed ahead to six-month highs, helping Paris to buck the otherwise negative trend after the firms's restructuring plan on Thursday produced a welter of broker upgrades.
Strategists said an unexpected jump in the US unemployment rate meant any market gains would be capped over the remainder of the year, as it countered earlier data which suggested that the recovery in the world's biggest economy was back on track.
"The data has destroyed any hopes of a near-term recovery in the market," said Gareth Evans, a European equity strategist at ING Barings.
By 1642 GMT, with only Frankfurt officially trading, the FTSE Eurotop 300 index was down 0.5 per cent at 899 points, still around three-week lows, having shed more than two per cent ahead of Wall Street's opening.
The slide took the Eurotop 300 into the bottom half of its recent trading range and set it on course for a sixth consecutive day of losses. The last time that happened was in September.
Losing stocks outnumbered gainers by around two to one. The Eurotop 300 had rallied by up to 20 per cent from October's five-and-a-half year lows, but is down more than four per cent over the week, despite Thursday's half-percentage point cut in euro-zone interest rates.
The euro zone DJ Euro Stoxx 50 index added 0.13 per cent to 2,494 points, largely thanks to the Paris market where the French CAC-index ended up more than one per cent, with cosmetics giant L'Oreal and oil major TotalFinaElf both up strongly.
News that US Treasury Secretary Paul O'Neill and White House economic adviser Lawrence Lindsay had resigned had little impact on European market sentiment, traders said.
Shares in Belgium's Interbrew sank 5.14 per cent and touched a record low after the world's top brewer by volume told analysts it expected 2002 core profits to fall slightly below consensus forecasts, prompting a regulatory investigation into how it had disseminated the news.
A battle for the control of French bank Credit Lyonnais intensified as Credit Agricole bought up shares of its long-time takeover target in a bid to thwart an aggressive grab for control by BNP Paribas.
Shares in Credit Lyonnais rose 3.36 per cent to 53.20 euros, after hitting a record high of 55.85 euros earlier in the day. BNP was off 1.44 per cent, with Credit Agricole off 4.0 per cent.
Shares in Franco-Belgian bank Dexia soared by almost ten per cent amid relief that its third-quarter results sprang no nasty surprises and as investors bet that the bank could become the next bid target in the consolidating French bank sector.
Lloyds TSB and Barclays fell 0.98 per cent and 2.28 per cent, respectively, as investors continued to react to discouraging trading updates from both UK banks earlier in the week.
Britain's No.2 bank Royal Bank of Scotland issues a trading statement on Monday, but its shares edged up 0.4 per cent.
Among second-liners, the standout was Tandberg, which crashed by 52 per cent after the Norwegian video conference gear maker cut its sales outlook from the stellar growth rates achieved since the September 11 attacks, when business air travel fell sharply.
The US unemployment rate shot up to six per cent in November,its highest level since April, while the number of workers on US payrolls fell by 40,000, when a rise of 38,000 had been expected.
Economists said the data was especially disappointing because earlier jobless claims numbers had suggested the US labour market had begun to show renewed signs of life.
But some fund managers took the news in their stride. "We already know that it is a muted US recovery, so there's always a risk that one month's data can put fresh doubts in investors' minds," said Andrea Williams, European equities chief at Royal London Asset Management.
She added that Europe, particularly Germany, had its own economic problems.
"We remain quite defensive and are not really taking any aggressive sector bets in the run up to year-end."
In New York the Dow Jones industrial average was flat and the tech-laden Nasdaq Composite rose 0.43 per cent.