European shares edge up as rally falters

LONDON: European shares ended slightly higher on Monday, losing steam after last week's late rally, though Nokia jumped on bid hopes after Google offered to buy peer Motorola Mobility .

Nokia rose 9.1 percent in volume twice its 90-day daily average after Google's bid renewed speculation that buyers might also be interested in the forlorn Finnish phone maker.

Nokia shares have slumped 47 percent since the start of the year as it has lost market share in both the smart and cheaper mobile phones segments. Traders said the drop in share price might now have left it cheap enough to flush out bidders.

"M&A is positive for the market and confidence," said Veronika Pechlaner, a fund manager on the Ashburton European equity fund. "But we are not fans of Nokia. There are still structural pressures, and we would not buy merely on speculation of a bid."

The pan-European FTSEurofirst 300 index of top shares closed up 0.1 percent at 969.25 points following last week's volatile swings and a gain of 3.6 percent on Friday.

The index's next resistance level is seen at 982.3, representing a 38.2 percent Fibonacci retracement from its low in March 2009 to its February high, with the next support level at 918, its 50 percent retracement.

The index dipped in and out of positive and negative territory on Monday in choppy trade in volumes only 50 percent of the 90-day average.

Investors will have been deterred by data from the New York state manufacturing sector that showed growth had slowed sharply, denting hopes the US economy was on the recovery track.

Public holidays that closed markets in Austria, Greece and Italy also trimmed volumes.

ECONOMIC WORRIES

The negative backdrop of the euro zone's long-running debt crisis is also keeping investors wary.

"Europe is higher today as the market stabilises after a week of significant volatility, (but) nothing fundamental has changed. There are still economic concerns in the United States and what the policymakers will do in Europe about the debt crisis," Pechlaner said.

Analysts said expectations were low that Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy will address the structural issues and imbalances exposed by the debt crisis.

Both parties said they would not discuss a common euro zone bond, which some see as a possible remedy to the bloc's debt crisis.

"I fear it will not deliver what the euro zone needs, which is either organised fiscal transfers or a break-up," said Andy Lynch, fund manager at Schroders, which manages 197 billion pounds.

"I am sure we will get more muddle-through, not a long-term sustainable solution."

Banks, which were the focus of much of last week's volatility, were unable to build on the previous session's rally, which had been triggered by a short-selling ban in four countries. The STOXX Europe 600 Banks index ended down 0.1 percent.

British banks Barclays and Lloyds Banking Group were the biggest fallers on Monday, down 2.1 percent and 1.7 percent.

Copyright Reuters, 2011