European shares rebounded from three-week lows on Monday, with energy and mining stocks advancing as confidence over the outlook for corporate profits overshadowed worries about political unrest in Egypt. The pan-European FTSEurofirst 300 index ended flat at 1,143.53 points, recovering from a three-week low of 1,131.56 earlier in the session following nervousness over protests in Egypt to unseat President Hosni Mubarak.
Concerns about the unrest spreading across the Middle East largely eased, though investors will be closely monitoring developments in Cairo after Mubarak appointed a new interior minister as part of a revamped cabinet.
The STOXX Europe 600 oil and gas index was among the biggest gaining sectors, up 0.8 percent, with sentiment helped by better-than-expected profits from US peer Exxon Mobil.
"The news flow out of the United States is very good and the market is not prepared to give up much ground. Seven out of ten companies are reporting better-than-expected results and revenue growth is starting to come through," said Mike Lenhoff, chief strategist at Brewin Dolphin. Confidence was also boosted by hopesfor a solid pace of economic recovery, after a measure of factory activity in the US Midwest rose to a 22-1/2 year high in January and consumer spending in December advanced for a sixth straight month.
Mining firms also rose as copper prices hovered near record highs on healthy demand expectations from the United States and China, with the STOXX Europe 600 basic resources index up 0.5 percent. Though worries over the political crisis in Egypt largely receded, its impact still lingered among individual shares. The world's biggest cement producer Lafarge fell 1.7 percent after the French firm said it was halting production in Egypt due to the unrest.
Within the sector, Italcementi and Titan Cement shed 3.7 and 4.2 percent respectively. British travel firms TUI Travel, Thomas Cook and airline firm International Consolidated Airlines Group shed 1.8 to 3.1 percent, on travel disruption caused by the crisis in Egypt and firmer crude prices.
Analysts said technical indicators pointed to profit-taking in the equity markets after hefty gains from the start of the year which culminated in a 1.9 percent gain for the FTSEurofirst 300 this month.
"People will continue to watch what's happening in Egypt, but I think the market takes this as an excuse after a long rally to do some profit taking," said Klaus Wiener, chief economist at Generali Investments. "If we have a correction here, there are a lot of investors still on the sidelines who know that many analysts think that equities will be the best performing asset class in 2011. The global growth momentum is quite solid and that helps companies with the earnings."
Among individual gainers, Carrefour rose 5.3 percent after the world's second-biggest retailer confirmed that it is looking at listing certain assets to boost their valuation. Sanofi-Aventis gained 1.3 percent after US biotech group Genzyme opens its book to the French drugmaker in take-over talks.