European shares close flat

European shares closed slightly weaker yesterday, with Britain's Barclays down for a second day after warning of higher bad debts and some other banks including Bank Austria up on takeover talk.

Concerns about France's expected vote to reject the EU Constitution tomorrow and investors' reluctance to take positions before three-day weekends in Britain and the US also weighed on shares.

By 1535 GMT, the FTSEurofirst 300 index had unofficially closed 0.15 per cent weaker at 1,100.6 points after hitting new seven-week highs earlier in the session. The DJ Euro Stoxx 50 index lost five points to stand at 3,081.

Austrian stocks made a rare appearance in the equity headlines as Bank Austria rose seven per cent on mounting speculation that Italian bank Unicredito was in talks to buy HVB Group, the Austrian lender's parent company.

HVB shares added one per cent, having climbed seven per cent on Thursday on the takeover talks, but sources familiar with the situation said a price for the deal was not finalised.

Bank Austria rival Erste Bank also surged four per cent on the news, and Austrian oil and gas group OMV also rose four per cent on an upgrade from Goldman Sachs.

US shares failed to offer impetus with the Dow Jones industrial average down six points as crude rose above $51 a barrel, which outweighed data showing inflation eased a bit in April.

Shares in TF1 fell two per cent on concerns caused by the French commercial television broadcaster's decision to bring forward the release date of its first-quarter earnings.

Some analysts said a slow advertising market might lead it to lower its growth goals. Traders also cited rumours, which TF1 denied, that it planned to take over Germany's biggest commercial TV broadcaster, ProSiebenSat.1 Media.

"We totally deny that TF1 is considering buying all or even part of ProSieben," a TF1 spokeswoman said.

Nevertheless, ProSieben rose 4.6 per cent on the speculation.

Opinion polls in France show that 55 per cent of voters are likely to vote down the EU Constitution, seriously damaging Europe's economic vision. Although most analysts see limited effect on shares, some believe the market might be in for a shock.

"Markets could be in for some major event risk next week if French voters give this weekend's referendum the thumbs down as there seems to be a sense of relative complacency that a French yes vote will prevail," said David Brown, chief European economist at Bear Stearns.

"One potentially positive spin-off is that a French no vote could promulgate the ECB into a rate cut this year, especially if increased political uncertainty has a negative effect on eurozone business and consumer confidence."

Barclays, Britain's largest credit card lender, led the losers with a 1.1 per cent drop, extending Thursday's hefty fall after it warned of rising bad debts.

BP slipped 0.6 per cent after recent strong gains, while the telecoms sector also eased 0.6 per cent after a robust showing earlier in the week.

Italian insurer Generali added one per cent after an upgrade from Dresdner Kleinwort Wasserstein.

Roche rose nearly one per cent to 158 Swiss francs as UBS upgraded its price target to 180 Swiss francs from 168 francs, helping Zurich's SMI up 0.4 per cent.

Around Europe, London's FTSE 100 index was 0.2 per cent weaker, Paris's CAC-40 fell over five points and Frankfurt's DAX rose eight points late on.