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LONDON, England (Reuters) -- European share indices closed slightly higher on Monday as strength in French banks Societe Generale and BNP Paribas was offset by weakness in airline stocks after a bird flu scare in Germany.
Utility stocks continued to find favour, while Swiss drug maker Roche gained 2.60 percent on news it was considering selling its non-prescription drug business and had made an important advance in the hunt for cancer cures.
Daniel Birch, a strategist at independent broker Execution, said the European market was in a period of consolidation after a stellar start to the new year.
Investors were locking in gains made on cyclical plays like technology, telecoms and media stocks in the first weeks of 2004, and turning to defensives like tobacco and utilities.
"The feeling in the market was that we were due for a correction so that's why these defensive stocks are more favorable at the moment but otherwise there is no real economic basis for it.
"I still think that these late cyclical sectors are going to be the ones. There's more upside for media, telecoms and technology as well.''
The FTSE Eurotop 300 index of pan-European blue chips closed 0.2 percent firmer at 983.5 points on solid turnover of 3.1 billion euros.
The narrower DJ Euro Stoxx 50 index rose 0.5 percent to 2,853.9 points. The Stoxx 50 climbed more than five percent in the first three weeks of 2004 but has since dipped two percent.
U.S. data uninspiring
Data showing the U.S. economy continued to grow at pace failed to inspire investors, coming in slightly weaker than expected and confirming that jobs growth remains elusive.
The Institute of Supply Management said its manufacturing index nudged upward to 63.6 in January from 63.4 in December, falling short of economists' forecast of 64.0. Another report said construction spending rose slightly less than expected in December.
"The readings are far from alarming but they show a slowdown in the economy's recovery dynamic and that we should not expect much further improvement from current levels,'' said economist Veronique Riches-Flores from SG Equities.
"Everyone is now waiting for the new round of tax cuts in the United States, showing the problem of this economy, which is that not a great deal takes place without tax incentives. It raises concerns as to what will happen when these incentives stop.''
After a weak start in New York, the blue-chip Dow Jones industrial average was 0.4 percent firmer at 10,525.6 points, while the Nasdaq Composite Index rose 0.7 percent to 2,079.6 points by 1728 GMT.
Airline shares dip
Around Europe, Paris's CAC-40 index ended up 0.7 percent, Zurich's SMI rose 0.9 percent and Frankfurt's DAX closed 0.3 percent firmer. London's FTSE 100 closed 0.2 percent weaker, weighed on by telecoms heavyweight Vodafone and British Airways.
Shares in BA and other European airlines were weak after authorities said they were testing two women in Germany for what could be Europe's first cases of Asian bird flu infection.
BA fell 4.1 percent, Lufthansa was down 2.7 percent, while Air France and Dutch carrier KLM both fell 3.3 percent.
Analysts said news of the possible bird flu cases was compounded by fresh security concerns which cancelled flights over the weekend, and fallout from the battle between European discount carrier Ryanair and European regulators over subsidies.
Shares in Ryanair, which is awaiting a ruling about the subsidies on Tuesday, closed down 1.4 percent.
French banks Societe Generale and BNP Paribas were among the top blue-chip performers, gaining 3.4 and 2.3 percent respectively ahead of their results. BNP reports on Thursday, followed by Socgen next week.
Shipping firms were weaker with Dutch firm Nedlloyd down 7.4 percent after saying it would buy British partner P&O out of their loss-making container joint venture. P&O ended down 2.8 percent.
Security firms were in focus following news Britain's Securicor was in talks to merger with Denmark's Group 4 Falck in a nil-premium deal. Securicor rallied 3.1 percent, Group 4 Falck ended 6.4 percent higher and global heavyweight Securitas firmed 1.5 percent.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
