European stocks eke out gain, Wolseley cheers

European shares closed a fraction higher yesterday as solid European sales data lifted beaten-down auto stocks but sentiment was cautious as investors await a clearer picture of the second-quarter earnings season.

Sectors most highly exposed to the economic cycle like industrials and construction also outperformed following a positive outlook from British-based plumbing and building supplier, Wolseley.

Upbeat results from Sweden's SKF, the world's largest maker of roller bearings, also helped.

The FTSE Eurotop 300 index of pan-European blue chips ended 0.2 per cent firmer at 981.8 points on light turnover.

The narrower DJ Euro Stoxx 50 index rose 0.1 per cent to 2,763.2 points, trapped in the middle of its 2004 range.

"For the medium-term view, we are quite confident but for the short-term, the market feels a little insecure," said Juergen Lukasser, a global fund manger for Constantia Privatbank in Vienna.

While early second-quarter results in both Europe and the US had largely met or beat expectations, volumes and volatility remained very low as investors saw equities close to fair value, Lukasser said.

"If we see that the economy in America is cooling down and the weakness we have seen in recent macro figures is not seasonal summer weakness but a change in the trend, then we will go down - there is no way out."

Wall Street was flat, with results from US semiconductor heavyweight Intel after the close foremost in investors' minds following a number of warnings from the tech sector.

Expectations for corporate earnings in Europe are high, with analysts betting on earnings per share growth of around 20 per cent in 2004.

"Although we will probably fulfil the double-digit earnings growth expectations, that is not sufficient to move the market forward," said Hendrick Garz, a European equity strategist at WestLB.

"Interest rates are rising and the peak of the earnings cycle has been reached, so the news is not getting better. We have already performed quite well from the lows of a couple of months ago, and some of the risk factors are still in place," he said, highlighting the threat of terror attacks and rising oil prices.

In New York, the blue-chip Dow Jones industrial average was flat at 10,239.8 points, while the Nasdaq Composite Index fell 0.1 per cent to 1,934.6 points by 1612 GMT.

Around Europe, London's FTSE 100 closed 0.1 per cent weaker, while Paris's CAC-40 ended up 0.1 per cent. In Zurich, the SMI ended flat and Frankfurt's DAX closed 0.3 per cent firmer.

Auto makers were in favour following data showing a 5.6 per cent rise in overall June auto sales across western Europe. BMW added 1.2 per cent, while DaimlerChrysler rose 1.4 per cent.

Philips Electronics added 1.3 per cent to €21.33 after posting a second-quarter net profit of €616 million, better than expected.

SKF, a frequently used barometer of the manufacturing sector, rose 4.7 per cent to 287 crowns after posting a pretax profit of 1.05 billion Swedish crowns ($141 million).

Wolseley added 5.1 per cent to 875 1/2 pence after the world's biggest supplier of plumbing and heating goods said its key UK and US units had performed strongly in the 11 months to the end of June.

Heavyweight energy stocks weighed as oil retreated from a recent peak above $40 a barrel, while brewers also softened, led by Belgium's Interbrew as its first-half volumes fell short of expectations.

Interbrew shares eased 1.9 per cent to €25.30, while rivals Heineken, Carlsberg and Scottish & Newcastle each fell between 0.4 and 1.5 per cent.

French engineering group Alstom fell 14.3 per cent to €0.76 after launching its €2.2 billion ($2.7 billion) rescue share issue, while telecoms firm BT fell 1 per cent following a downgrade from Dresdner Kleinwort Wasserstein.