Eurostocks mixed, investors look to Nokia update

European stocks were mixed yesterday as British bank Abbey National's profit warning stifled drugs and technology sector gains, with today's Nokia update looming large.

"After last week's five to six per cent fall we've had something of a technical rebound, but apart from that everyone is waiting for Nokia," said Gert de Mesure, head of equity strategy at Delta Lloyd Securities in Antwerp.

Oils and automakers led the decliners column, hit by tumbling oil prices and weak DaimlerChrylser sales as drugs fed on a rally in Elan Corp and heavyweight GlaxoSmithKline, while techs staged a broad-based rebound.

By 1555 GMT, the FTSE Eurotop 300 index was up 0.1 per cent as the narrower Euro Stoxx 50 index shed 0.2 per cent.

On Wall Street, the Dow Jones industrial average index was 0.3 per cent higher after see-sawing following news that US security forces had thwarted a dirty bomb attack, while the tech-laden Nasdaq Composite rose 0.4 per cent.

Last week European stocks fell to their lowest level in eight months, hit by concerns about how Corporate America is run, an escalation in Middle East violence and the threat of war between Pakistan and India.

Analysts were not convinced that yesterday's rally marked a turning point, as there were few catalysts on the horizon to stimulate demand and restore confidence.

"Retail investors have been scared by the negative headlines and are still sitting on losses after the tech bubble burst. They are not likely to venture back into equities until the newsflow improves," said Corne Biemans, a global portfolio manager at Fortis Obam NV in Utrecht. However, Nokia's mid-quarter update at 0900 GMT today could provide the market with a brief respite.

Analysts expect the company to announce that it will miss its second-quarter sales target and meet its pro forma earnings per share goal of 0.18-0.20 euros, although an increasing number expect profits to come in at the bottom of the range.

"Nokia is the only thing that could help the market recover at the moment because a big chunk of bad news has already been discounted by the stock," said De Mesure.

"If the news is not as bad as expected, we could see some short-covering by the hedge funds... but whatever it announces it won't warrant a knock in the price of Nokia," he added.

Shares in Nokia, the world's largest mobile phone manufacturer, ended up 2.5 per cent, shrugging off negative comments by two investment firms earlier yesterday.

J.P. Morgan upgraded the stock, but cut its price target to 14 euros from 16 euros, saying that while the company faced substantial challenges in the coming months, the stock was already discounting the worst of a low growth environment.

Merrill Lynch cut its 2002 estimate mobile phone sales by six per cent to 385 million units and slashed its 2003 estimate by 11 per cent to 410 million units.

Other tech stocks that recovered some of last week's steep losses included STMicroelectronics and ASML, which rose 2.4 per cent and 1.5 per cent respectively.

Elsewhere, news from embattled Irish drug manufacturer Elan Corp that it would scale back its operations helped lift the stock 6.9 per cent. The stock was Europe's top gainer and helped to lift the drugs sector by 1.9 per cent.

Europe's biggest drugmaker Glaxo added 3.8 per cent while AstraZeneca added 4.1 per cent.

Oil shares were tugged lower by a one per cent fall in Brent crude prices amid heavy supply concerns, with BP losing 0.5 per cent, TotalFinaElf shedding 0.7 per cent and Royal Dutch Shell easing 1.8 per cent.

Car makers were dented by a six per cent fall in sales at DaimlerChrysler's luxury Mercedes division, which led the German carmaker's stock down 2.4 per cent. Volkswagen fell 0.9 per cent and Porsche shed 1.2 per cent in sympathy.

Mortgage bank Abbey National tumbled 7.8 per cent after it shocked investors by warning that 2002 pre-tax profits would be substantially below expectations due to bad debt provisions and write-offs at its wholesale bank.

The news dragged down shares in other British banks, with HBOS down 2.3 per cent, Royal Bank of Scotland off 1.0 per cent and Alliance & Leicester 2.9 per cent lower. The European banking sector fell 0.4 per cent on the day.

M&A Shares in British tobacco firm Gallaher Group lit up after a weekend report that larger rival British American Tobacco Plc was planning a bid. The stock rose 2.9 per cent.

Elsewhere, news that British defence contractor BAE Systems Plc had joined a $7 billion auction for US defence and auto parts group TRW Inc undermined its shares amid investor worries that the firm could overpay for the acquisition. Its shares tanked 4.4 per cent.