Eurostocks snap three-day rise

European shares snapped a three-day winning streak yesterday and ended slightly lower, with bid activity propping up telecoms, while heavily-weighted oil majors Shell and BP eased.

Takeover speculation buoyed telecoms and shares in Dutch telecoms group Versatel surged 12 per cent on hopes that pan-European telecoms carrier Tele2 might make a bid for it after losing a battle for Sweden's Song Networks.

Vodafone put on 0.36 per cent to 140 pence after ABN AMRO bank raised its target price on the stock to 155p.

By 1555 GMT, the FTSEurofirst 300 index unofficially closed 0.14 per cent lower at 999.8 points, flat on the week. Market breadth was mixed with 186 stocks falling while 117 shares rose and eight issues stayed unchanged.

Europe's third-quarter results season so far has seen firms mostly shrug off the impact of higher energy and raw materials costs, but investors are sticking with defensive plays.

"The market still favours defensives such as utilities and this might stay so unless oil prices fall back to $40-$45," said Mike Lenhoff, chief strategist at private client money manager Brewin Dolphin, which manages $14.5 billion in investments.

Utilities have been the best performers so far this year, up 20 per cent, while the FTSE EuroFirst index has risen only some four per cent, crammed by concerns of slowdown in corporate profits.

BP and Shell lost 0.4 and 1.5 per cent respectively, still under pressure from this week's eight per cent drop in oil prices. Yesterday, US crude oil was steady at $51.2 a barrel. Earnings from a clutch of banks including ABN Amro and Swiss investment bank UBS, a European Central Bank rate decision and the outcome of the US elections will dominate European equity investors' attention next week.

Around European bourses, the FTSE 100 index in London eased 0.27 per cent and the Paris CAC-40 shed 0.4 per cent, while Germany's DAX rose 0.2 per cent.

Steel stocks Arcelor and Anglo-Dutch Corus recovered from Thursday's sharp fall which was triggered by China's surprise interest rate hike to cool its economy.

The basic producer sector regained part of Thursday's 2.7 per cent fall as investors reassessed the impact of China's rate hike on demand for commodities. Mining giants Anglo-American and BHP-Billiton were lower.

"There will still be an underlying bedrock of demand for oil and commodities. It's just that the Chinese economy will not grow at the same breakneck pace," Mr Lenhoff said. The DJ Euro Stoxx 50 index which tracks top shares in the euro zone, fell 0.22 per cent to 2,812.4 points.

Drug makers will be a big focus next week as investors eye the outcome to the neck-and-neck US presidential election on Tuesday. A victory for Democratic Senator John Kerry is seen as having a negative impact on the healthcare industry in his more aggressive approach to curbing rising prescription-drug costs.

Among the day's movers, German retailer Metro fell two per cent after its third-quarter operating earnings came short of analysts' forecasts.