LONDON (CNNfn) - European stocks posted mixed performances Monday as a solid start on Wall Street and firmer bond prices were undercut by sour sentiment ahead of a looming decision on U.S. interest rates.
London shares capped an uncertain session nearly half a percent lower as merger talk in the financial sector and a brewing takeover battle in the pub industry failed to lure buyers off the sidelines. Frankfurt and Paris edged up just over 1 percent, while Zurich stocks fell fractionally.
Across Europe, caution was the day's watchword as traders tried to divine whether the Fed will exercise its rate-tightening bias through a widely anticipated 25-basis-point hike, a series of graduated hikes, or a one-time half-percentage-point increase.
London's benchmark index, the FTSE 100, finished down 0.46 percent, or 29.7 points, at 6,405.7 on thin volume of 744 million shares. Decliners led advancers by a six-to-one margin as investors refrained from big moves ahead of a two-day Fed meeting that could spell the beginning of a rate-driven clamp down on inflation pressures.
Germany's electronically traded Xetra Dax index closed 1 percent higher at 5,356.95, a gain of 55.74 points, pulled higher by a solid start on Wall Street and a strong performance by index powerhouse Deutsche Telekom (FDTE). Deutsche shares advanced 2 percent to 40.30 euros on the first day of trading for its new 286 million share issue.
The share offering captured the spotlight Monday after the telecom provider said it plans to seek clarification about a steep drop in the company's share price Friday ahead of the new issue. Deutsche alleges institutional investors deliberately tried to drive the company's stock price down to make shares in the new offer cheaper to buy.
In Paris, blue chips on the CAC 40 ended just over 1 percent higher at 4,465.23, a session high. Total volume on the CAC 40 was 1.8 billion euros. But the mood was subdued throughout the day as traders girded for the Federal Reserve meeting Tuesday.
Zurich's SMI slipped 0.26 percent, or 18.1 points, to 6.945.9, weighed down by a nearly 6 percent slide in energy and engineering firm ABB on the first day of trade for its new registered issue.
Though the Dow was up about 120 points when the London market closed, traders continued to question the resilience of the benchmark U.S. index.
In London, British gas retailer Centrica (CNA) headed the blue-chip advancers list, spurting 4.7 percent to finish at 144 pence after Merrill Lynch upgraded the stock's medium-term rating to "accumulate".
The upgrade came as investors awaited Centrica's expected announcement of plans to buy out the Automobile Association, Britain's largest auto-breakdown service, for 1.1 billion pounds ($1.75 billion). The AA, which is owned by its members, has a near-50 percent share of the U.K. market for car-breakdown services.
A report that two of the U.K.'s leading blue-chip insurers are close to a $16 billion merger propelled stocks of both companies higher. Reports in a U.K. newspaper of an imminent all-paper bid from CGU (CGU) for Royal & Sun Alliance (RSA) drove the companies' shares 1 percent and 4.3 percent higher, to 924 pence and 559 pence, respectively. A takeover could come within weeks, the report said.
Royal & Sun Alliance was the second biggest gainer on the FTSE 100.
Shares of U.K. pub owner Allied Domecq (ALLD) built up a head of froth Monday after would-be takeover candidate Whitbread (WTB) played down the threat of regulatory obstacles to its bid for Allied's 3.500-strong pub interests. Allied stock rose 1.7 percent to close at 607 pence, while Whitbread shares shed 1 percent to 1,035 pence. Whitbread faces a challenge from rival Punch Taverns, which launched a hostile 2.7 billion pound ($4.27 billion) all-cash bid for Allied last week
Mining concern Rio Tinto (RIO) gained 1.2 percent, while rival Billiton (BLT) added 2.75 percent.
Debenhams (DEB) denied it was talking to rival Storehouse (SHS) about a takeover. However, a report issued Monday indicated that the pace of mergers among U.K. retailers is likely to step up, following Wal-Mart's (WMT) acquisition of supermarket operator Asda (LSE:ASSD).
Shares in soccer club Newcastle United (NCU) surged 21.6 percent to close at 87 pence after cable operator NTL (NTLI) said it soon may revive its bid for the club. In Paris, cable operator Canal Plus (PAN) jumped 3.56 percent to 270.6 euros after securing the rights to French soccer matches for three seasons beginning in 2001 under a joint rights-sharing deal with digital broadcaster Télévision Par Satellite.
Saint-Gobain (PSGO) leapt 4.67 percent while Accor advanced 4 percent.
In Paris, shares of utility giant Suez Lyonnaise des Eaux (PLY) rose 1.05 percent to 163.9 euros after it said it would pay $4.1 billion for U.S. water treatment group Nalco (NLC ).
In Frankfurt, Siemens (FSIE) gained nearly 2 percent to 74.81 euros after its India subsidiary secured an electrical-equipment supply contract.
Swissair parent SAir Group added 2 Swiss francs to 328.00 francs after securing a 20 percent stake in South African Airways.
-- from staff and wire reports