European stocks end flat, BAT offsets drugmakers

European shares ended little changed yesterday as gains in British American Tobacco helped offset falls in drugmakers such as GlaxoSmithKline.

European drugmakers were hurt by overnight news from the United States, where Pfizer cut its 2004 revenue forecasts because of lower-than-expected sales for some products and due to foreign exchange rate fluctuations.

GlaxoSmithKline fell 1.5 per cent, Novartis was off 1.7 per cent and Roche eased 0.2 per cent.

BAT performed strongly after a favourable ruling from a US appeals court overnight.

The court agreed to consider the tobacco industry's challenge of a lower court decision that permitted the US government to seek $280 billion in penalties in its racketeering case again the industry.

In addition, BAT won approval from the Chinese government to set up a joint venture in the country, which has the largest tobacco market in the world. BAT rose 3.2 per cent to 868 pence.

Among standout performers, Yara International, the world's biggest fertiliser producer, rallied 4.5 per cent to 58.5 crowns in Oslo after its second-quarter results beat forecasts.

By 1551 GMT the FTSE Eurotop 300 index of pan-European blue chips closed unofficially up 0.21 per cent at 971.46 points while the narrower DJ Euro Stoxx 50 index fell 0.09 per cent to 2,713.3.

Shares in mobile phone maker Nokia extended Thursday's losses as broker downgrades rolled in. Nokia plunged by up to 18 per cent on Thursday after it issued a profit warning.

The Eurotop 300 index has fallen about 4 per cent in less than a month, hit by investor concerns about a slowdown in corporate profit growth.

"This month, three out of five of our top-down indicators are falling - the OECD leading indicator, the German IFO survey and 12-month percentage change in European bond yields," said Khuran Chaudhry, a strategist at Merrill Lynch.

"The OECD leading indicator is 70 per cent positively correlated to the direction of pan-European profit revisions."

US shares rallied yesterday after the pace of consumer price increases moderated last month and economists said this supported hopes that inflation was being kept at bay.

"This reinforces market expectations that the Fed will go relatively slowly and stick to a measured timing of rate rises," said Ken Wattret, chief economist at BNP Paribas in London.

Solid results overnight from International Business Machines and Samsung Electronics provided some relief to tech stocks, which have taken a beating in the past two weeks.