European shares end mixed as oil majors fall

European shares posted a mixed close yesterday as a sagging Wall Street undermined earlier gains made on strong financial sector earnings and a softer crude price eroded the shares of heavyweight oil producers.

Equity markets were buoyed earlier in the session by forecast-beating results from blue-chip companies such as Dutch insurer ING, Italian bank UniCredito and its takeover target, German banking group HVB.

But while financial firms remained strong, gains on all major European indexes were surrendered after Wall Street slipped as a troubled General Motors hit a 23-year low and as oil prices slid to a four-month low, knocking oil shares.

The FTSEurofirst index of pan-European shares closed 0.01 per cent up at 1,225.4 points, about one per cent below a three-and-a-half-year peak of 1,242.24 points set in early October. The UK's FTSE 100 underperformed.

"It's a combination of a lot of things dragging the market. The Bank of England left rates unchanged, the U.S. is down and so is the price of crude," said Daniel Birch, a strategist at Execution stockbrokers. "The FTSE especially is very oil heavy."

The FTSE 100 fell 0.3 per cent, weighed by oil and gas giant BP, which lost 2.1 per cent, and rival Royal Dutch Shell, which fell 1.7 per cent. French oil group Total slid three per cent.

But M&A news, which had fuelled buying earlier in the week, helped support the FTSE, and drinks can maker Rexam rose 3.1 per cent on rumours of a takeover bid or a leveraged buyout.

Meanwhile, the dollar rose against the euro after a record US trade deficit in September did little to alter expectations of higher US interest rates. ING shares rose 3.3 per cent to their highest level in over three years after the group pleased investors with a forecast-beating 21 per cent jump in quarterly net profit and an upbeat stance on the rest of 2005.

BNP Paribas added 2.2 per cent, while Unicredito rose four per cent after Germany's HVB Group beat forecasts. Unicredito is in the process of buying HVB, which also rose four per cent.

Utilities were also firmer with Germany's E.ON up one per cent after reporting higher earnings.

Sources familiar with the matter have told Reuters E.ON approached Scottish Power over a possible takeover and the two firms were in talks that could lead to a deal. But E.ON declined to comment yesterday, saying only it would not rule out large acquisitions.

Shares in BT fell three per cent after it reported second-quarter core earnings toward the lower end of analyst forecasts and investors fretted about margins and cash flow.

"BT's 2Q05/6 results would appear at first glance to be bang in line with our below-consensus expectations. But slightly more-than-expected margin weakness and lower cash flow is unlikely to be taken well. Our sell rating is maintained," Nomura analyst Chris Alliott said in a note.