European blue chips stumbled in midsession trading yesterday as Infineon's second-quarter loss and Chubb's profit warning reminded investors of the rocky economic backdrop for corporate earnings.
Volatile basic producers, foods, media and cyclicals were among the weakest sectors across Europe.
Oil majors edged higher on news of a bumper merger between two of their Russian peers and amid expectations of a cut in oil output when producer cartel OPEC meets tomorrow.
Some longer-term investors were prepared to ignore the current angst over this quarter's earning results and evaluated the durability of companies' business plans instead.
"The market is scared that results from the telecoms, IT and finance sectors will come in below expectations. However, the turnaround story and outlook from these companies is much more important," said Rene van der Zeeuw, head of European equity investments at Robeco in Rotterdam.
By 1050 GMT, the FTSE Eurotop 300 index was 0.08 per cent lower at 815 points, with declining issues evenly balanced by climbers. The DJ Euro Stoxx 50 index of euro zone blue chips eased 0.2 per cent to 2,308 points.
US stock index futures were down about 0.2 per cent as a lower open on Wall Street loomed, giving European investors little encouragement to buy.
Among national bourses, Britain's FTSE 100 index was up 0.34 per cent, France's CAC-40 added 0.14 per cent, Germany's DAX lost 0.86 per cent, and Switzerland's SMI fell 0.7 per cent.
Last week, the FTSE Eurotop 300 gained two per cent and briefly hit its highest level since January as bourses consolidated their 20 per cent advance from a six-year closing low in mid-March, helped by steadying nerves as the war in Iraq ended.
The technical picture remained supportive, at least for the short term.
"Indices have been driving upwards from mid-March. At the moment, the FTSE Eurotop 300 benchmark is trading above the 20-day and 60-day moving averages, which is a good sign and should support the index up to about 900-points," said Elizabeth Miller, a technical analyst at Red Tower Research.
"However, this movement is within the context of the long-term bear market," she added.
With the war in Iraq over, investors are taking a closer look at the business environment as companies report, and not liking what they see, strategists said.
"There is nothing good to point at. The only positive thing you could say about the last three months is things got a lot cheaper," said Chris Johns, global strategist at ABN AMRO bank.
German semiconductor group Infineon fell 2.8 per cent after saying its second-quarter loss widened as it continued to suffer from slumping memory chip prices and gave only a cautious outlook for the year.
Among the day's other standouts, shares in British security company Chubb, which last week revealed a bid approach, fell 7.3 per cent after it said full-year results would be well below forecast because of weakness in its Asian and US hotel locks businesses.
Dutch broker Van Der Moolen sank 8.7 per cent after confirming it was being investigated by the New York Stock Exchange for possible abuse of the market's trading system.
The oil sector digested news that Russia's second and fifth-largest oil companies YUKOS and Sibneft will merge to create the world's fourth-largest producing oil company.
Energy companies were also supported by hopes that the oil producers' cartel OPEC will move to curb output at a meeting tomorrow.
Among the oil groups, European leader BP was up 1.1 per cent , while Shell rose 1.2 per cent.
Spanish property firm Metrovacesa fell 3.5 per cent a day after a hostile takeover bid by an Italian consortium collapsed.
The consortium, led by Caltagirone, said on Monday its attempt to take over Metrovacesa had failed as shareholders agreed to sell less than a quarter of the firm's shares.