By Amanda Cooper
LONDON, Jan 7 (Reuters) - European shares ended a choppy
session virtually unchanged on Monday as gains in defensive
stocks such as telecoms and healthcare were eclipsed by a soft
performance on Wall Street and a slide in crude oil.
After last week's weak U.S. employment report, equity
investors sought out perceived safe-havens, boosting shares in
Swiss food producer Nestle <NESN.VX>, while drugmakers
GlaxoSmithKline <GSK.L> and Sanofi-Aventis <SASY.PA> were also
among the top gainers, along with German utility E.ON <EONG.DE>.
A sharp reversal of an early rally on Wall Street quickly
sapped gains from the FTSEurofirst 300 index <> of top
European shares. The index ended 0.01 percent higher at 1,457.79
points, having swung between gains of 0.5 percent and losses of
as much as 0.6 percent earlier.
Last week the index fell 3.2 percent as the December U.S.
employment report showed the slowest job growth in over four
years and a rise in the unemployment rate to a two-year high,
which rekindled fears of a U.S. recession.
The prospect for a slowdown in growth weighed on retailers
in Britain, particularly.
"The market is pretty nervous," said Henk Potts, a
strategist at Barclays Stockbrokers
"We think it's going to be another volatile year, which is
something investors will have to deal with but the central
banks' ability to cut interest rates should smooth the way a bit
and we still remain positive."
Nestle was the biggest positive influence in a weaker
broader market, rallying 2.2 percent, while France's Danone
<DANO.PA> gained 3 percent, and Anglo-Dutch group Unilver
<UNc.AS> rose 2.6 percent.
Among telecoms, Spain's Telefonica <TEF.MC> and France
Telecom <FTE.PA> both rose 3.7 percent, and Deutsche Telekom
<DTEGn.DE> gained 2.9 percent.
GlaxoSmithKline, AstraZeneca and Sanofi-Aventis rose between
2.8 and 3.5 percent.
Oil and gas producers stayed in positive territory in spite
of a 2.5 percent drop in the price of crude oil after a series
of positive broker notes on the sector.
Global equity strategists at Citigroup upgraded the energy
sector to overweight from neutral.
"We suggest that the direction of global equity markets in
2008 will reflect the battle between two contradictory forces --
earnings downgrades and cheap valuations," the Citigroup
strategists said.
"We think that cheap valuations should win out (just) and
drive the global equity market up by around 10 percent in 2008,
but it will be a volatile ride."
BP <BP.L> was up 1.5 percent, Total <TOTF.PA> gained 2.1
percent, and Royal Dutch Shell <RDSa.L> was up 1.8 percent.
The FTSEurofirst rose just 1.6 percent last year in its
worst yearly performance in five years, though in 2008 a 3.6
percent fall has already wiped out those gains.
On Monday, 12 of Western Europe's 16 major index benchmarks
were in the red.
"We've had a huge barrage of very bearish statistics last
week from the U.S., and it's obviously weighing on the market,"
said Edmund Shing, strategist at BNP Paribas, in Paris.
"The question this week is: 'Are we ready for a short-term
bounce, or are we going to crack through the support levels and
go further down?' My view is that we'll get a small bounce
because we're getting oversold on a number of indices," he said.
Retailers took a beating on Monday, extending last week's
losses after a report British chains Marks & Spencer <MKS.L> and
Sainsbury <SBRY.L> might disappoint with their trading updates,
due later this week.
Marks & Spencer shares were down 3.8 percent, while
Sainsbury shares lost 3.6 percent. France's Carrefour <CARR.PA>
fell 1.7 percent, and Britain's Tesco <TSCO.L> lost 2.3 percent.
The DJ Stoxx index of European retail shares <.SXRP> has
shed almost 9 percent so far this year as concern builds over
the sector's profitability in light of tighter consumer credit,
a slowing economy, particularly in Britain, and weaker business
and consumer confidence.
Euro zone investor confidence fell to its lowest in 2-1/2
years in January, according to a sentiment gauge of around 2,600
European investors by the Sentix group.
Around Europe, Germany's DAX index <> and France's
CAC-40 <> were both up 0.1 percent, while Britain's FTSE
100 index <> fell 0.2 percent.
Interest rate decisions by both the European Central Bank
and the Bank of England are due on Thursday.
Among other decliners, shares in aerospace group EADS
<EAD.PA> fell 7.5 percent, hit by a report in Germany's
WirtschaftsWoche magazine that cited a high-ranking manager at
EADS as saying the group's A400M military transport aircraft
faces fresh problems that may delay its first flight.
Mining and technology stocks -- among those worst hit on
Friday by concerns over the economic outlook for the U.S. --
extended losses, with miner Rio Tinto <RIO.L> down 3.5 percent
and software firm SAP <SAPG.DE> 3.6 percent weaker.
(Additional reporting by Anshuman Daga in London and Blaise
Robinson in Paris, editing by Will Waterman)
