European shares were mixed yesterday afternoon as rising auto stocks offset weak telecoms, led by Norway's Telenor, and weak US manufacturing data added to uncertainty over the strength of an economic recovery.
After gains since mid-March that allowed the benchmark FTSE Eurotop 300 to bag its biggest quarterly rise since the final quarter of 1999, investors are unsure of the next step, and the earnings outlook remains patchy at best.
At 1410 GMT, the FTSE Eurotop 300 was down 0.1 per cent at 858 points, while the narrower DJ Euro Stoxx 50 index of euro zone blue chips was flat at 2,454 points.
In the latest snapshot of the US economy, investors were disappointed by a report showing that business in the US industrial heartland had expanded only marginally in June.
The National Association of Purchasing Management-Chicago business barometer rose to 52.5 from 52.2 in May but undershot economists' forecast for 53.0.
"Even though this small rise was unsurprising after May's bounce, it is disappointing for investors who are anxious to see strong signs of strengthening in the economy, when all indicators point at a seesawing recovery," said Valerie Plagnol, chief economist at CIC in Paris.
"This data heralds a mixed national ISM data and adds to a picture of anaemic economic recovery."
The report came after earlier figures showed business conditions in New York City had deteriorated in June to their worst level in 10 years as the Big Apple was plagued by job losses in banking, technology and apparel manufacturing.
Around Europe, London and Paris were flat and up 0.6 per cent respectively, while Germany's DAX outperformed after German Chancellor Gerhard Schroeder said on Sunday that his cabinet had approved sweeping income tax cuts to try to kickstart Europe's largest economy.
German retailers in particular, such as KarstadtQuelle, rose on hopes the tax cuts would entice price-conscious shoppers back into shops. In New York, the Dow Jones industrial average and the tech-laced Nasdaq Composite each rose around 0.5 per cent.
German auto makers moved up a gear, spurred by relief at the end of a damaging spate of strikes and news of a European sector upgrade from Merrill Lynch to "overweight".
BMW and Volkswagen - the two firms most hit by the four-week strike - climbed 2.1 per cent each, while DaimlerChrysler rallied 2.3 per cent after saying it would restructure its trucks business and save several hundred million euros a year as a result.