European shares end flat

European shares closed flat yesterday as investors struggled to drum up enthusiasm for a market hamstrung by mixed corporate earnings, a wobbly dollar and record high oil prices.

Insurers such as Aviva, Allianz, Axa and ING Groep fared well as the sector rebounded from a trouncing earlier in the week on news of a US probe into the industry's business practices.

Syngenta, the world's top agrochemicals firm, pleased investors as it raised its earnings guidance for the third time this year, sending the Swiss stock up 2.7 per cent to 115 Swiss francs.

But Swedish telecom equipment maker Ericsson slid 7.6 per cent to 20.8 Swedish crowns as investors looked past a good set of third-quarter results to its comment that market growth would slow next year.

Takeover speculation gripped the airline sector as British budget carrier easyJet rocketed on talk that an Icelandic airline could be building a stake or mulling a takeover.

EasyJet shares gained 16 per cent to 152p with 87 million shares changing hands, over 10 times the average volume. Icelandair said after the market closed it bought 8.4 per cent of easyJet.

And shares in Britain's Kidde rose 17.2 per cent to 170p, extending Thursday's 17 per cent leap, on hopes that United Technologies of the United States would raise its unsolicited cash bid for the fire-fighting equipment maker.

The FTSEurofirst 300 index ended flat at 996.61 points, and little changed on the week. The DJ Euro Stoxx 50 index, which tracks top shares in the euro zone, also closed flat at 2,788.89 points.

Three stocks rose for every two that fell, with volume above average at nearly €3 billion.

"The markets are very rangebound everywhere. Next week the earnings will be a bit more balanced, with less tech. However, the oil price and worry ahead of the US presidential election will put pressure on the market," said Michael O'Sullivan, a strategist at State Street Global Advisors.

Investors are dumping software stocks now that many have reported, with the utilities sector, up 20 per cent so far this year, the favourite among the traditionally safer parts of the market, Mr O'Sullivan said. The overall market is up about five per cent.

"Utilities are the defensives of choice as food and pharma are riddled with profit warnings," Mr O'Sullivan said. Global software leader Microsoft disappointed the tech sector with downbeat guidance for the current quarter.

Dresdner Kleinwort Wasserstein strategist Albert Edwards said the profits boom may be just a veil masking an "Ice Age de-rating" of equities to usher in a period of low returns.

"If we are right, then a pause in profits growth would be very serious indeed for equities," Mr Edwards said.

US oil prices hit a fresh record high of $55.39 a barrel on rising fears of a winter fuel supply crunch and robust economic growth in China, the world's number two user.

Strong oil prices, along with a slide in the dollar to an eight-month low against the euro, was a double blow for exporters such as automakers, which fell yesterday.

J.P. Morgan said that, by the first quarter of next year, carmakers would have to contend with higher oil and steel prices in a meaningful way for the first time as long-term supply contracts come up for renegotiation.

Among the sector constituents, Volkswagen, which reports next week, fell two per cent.

Data released yesterday showed that China's economy expanded by 9.1 per cent in the third quarter, the third consecutive quarter of slower growth.

Nevertheless the economy remains strong, reassuring sectors like metals that have ridden the local boom in construction.

Relief that Chinese growth was not slowing sharply sent mining shares higher yesterday, helped by the world's largest miner, BHP Billiton saying that China's strong demand for commodities was sustainable.

As European bourses shut, in New York the Dow Jones industrial average was off 0.2 per cent at 9,840 points, while the Nasdaq Composite was down 0.7 per cent at 1,938 points.