European shares end flat, CS up as co-CEO ousted

European shares ended flat yesterday as weak drug groups and patchy US and German data countered gains in Credit Suisse on relief the bank would shun cash-draining mergers in Europe.

Investors also welcomed Credit Suisse's decision to clean up its complex structure after the ousting of Co-Chief Executive John Mack, sending the stock up two per cent to 44.9 Swiss francs.

"Investors had gotten a bit unhappy with the (structure) and with the fact that Credit Suisse was talking about buying into German retail banking," said Pictet & Cie analyst Peter Thorne.

Britain's Abbey National rose two per cent to 497 pence, hitting a four-month high as talk resurfaced that Spain's Santander bank may have renewed interest in taking over its UK peer.

Santander shares in Madrid fell two per cent to €8.7. Drug groups were mixed, with GlaxoSmithKline falling 1.8 per cent to 1,148 pence after Smith Barney cut its rating on the stock to "hold" from "buy".

Rival AstraZeneca slid 2.3 per cent to 2,501 pence on news that a US consumer advocacy group asked for the Anglo-Swedish firm's cholesterol-lowering treatment Crestor to be taken off the market, saying it can lead to kidney damage.

But shares in French merger partners Sanofi-Synthelabo and Aventis bucked the sector's downward trend.

Sanofi was underpinned by news it planned to sell a cancer drug to US peer Pfizer for $620 million in a move requested by regulatory authorities overseeing the merger.

The FTSE Eurotop 300 index of pan-European blue-chip shares ended virtually unchanged at 1,004.8 points, down just 0.5 per cent for the week.

It remains wedged inside in a four-month-old trading range and is up a modest 2.4 per cent for the year. The narrower DJ Euro Stoxx 50 index, which tracks top euro-zone shares, eased 0.1 per cent to end at 2,818.86 points.

Investors digested economic figures ahead of a likely quarter-point interest rate hike in the United States next Wednesday when the Federal Reserve concludes a two-day meeting.

German business confidence, as measured by the Ifo index, unexpectedly fell for the fourth time in six months in June, signalling that economic recovery in Europe's biggest economy is at growing risk from weak domestic demand.

The US economy grew much more slowly than previously thought in the first quarter, by a downwardly revised 3.9 per cent instead of 4.4 per cent as previously thought, while inflation was higher.

But US consumer sentiment, as measured by the University of Michigan, rose to 95.6 in June in its final reading, up from 90.2 in May, while home resales hit a record high in May.

Economists said the day's data, although mixed, was not enough to change the overall view that economies were improving.

"It's not enough to change perceptions about how things are going," said John Shepperd, global economist at Dresdner Kleinwort Wasserstein investment bank.

The downward revision in US growth still meant that the US economy was expanding at an above-trend rate for three or even four quarters, he said, adding that yesterday's figures were unlikely to alter expectations about the Fed.

"It's a cast-iron certainty the Fed will increase rates by 25 basis points, and that doing nothing or more than that would be very disruptive to the market," Mr Shepperd said.

Britain's Berkeley Group rocketed on news it would return over £1.4 billion in cash to investors by 2010 as the upmarket property developer plans to exit the housebuilding business.

Berkeley shares jumped nearly 29 per cent to 1,197 pence, its news also buoying other homebuilders as investors hoped they would follow suit and hand cash back. Sector peers Redrow and McCarthy & Stone rallied eight per cent.

As bourses shut, the Dow Jones industrial average was up 0.2 per cent at 10,468 points, with investors taking heart from the stronger consumer confidence and housing figures.

The Nasdaq Composite gained 0.5 per cent to 2,025 points.