European stock indexes closed mixed on Tuesday as the impact of gains in telecoms inspired by a raised outlook from Vodafone, was countered by losses in the energy sector which tracked weaker oil prices.
Vodafone jumped 8 percent after the mobile phone group's first-half results topped forecasts, extending a bullish sector view from robust results already announced by Telefonica and France Telecom.
Among losers, Total fell 2.6 percent, BP 0.6 percent and Royal Dutch Shell 2 percent. U.S. crude oil prices declined 2.9 percent to $91.9 a barrel.
The pan-European FTSEurofirst 300 index closed 0.3 percent stronger at 1,516.1, well above the session's low of 1,498.5, while U.S. stocks also rose.
The European benchmark is still up 2 percent so far this year but well short of a 15 percent gain made by this time last year. The index has retreated about 7 percent from a 6-1/2-year high hit in mid-July before the credit crunch knocked markets.
"It looks like a period of adjustment over the next six to 12 months, when the economy slows and we establish a valuation base at a lower level," said Mark Bon, a European fund manager at Canada Life.
"Signals in the first half next year will show how severe the U.S. slowdown is; valuations could start looking attractive, inflation could subside and there is the possibility of more interest rate cuts next year, leading to another run-up."
"But if it's not a mild slowdown, it might take a little longer," said Bon.
Telecoms, one of the best performing industries so far this year, with a 15.7 percent rise, gained 3.3 percent on Tuesday, as Vodafone's results boosted the sector.
"It is very encouraging to see increases to their future guidance and after some difficult years, their core Western European businesses appear to have stabilized," said Wesley McCoy, investment director at Standard Life Investments, referring to Vodafone's results.
Telefonica rose 2.2 percent, France Telecom 3.2 percent and Deutsche Telekom 2.5 percent.
Banks advanced for a second day, with Barclays up 2.7 percent, Royal Bank of Scotland 4.1 percent and Lloyds TSB 2.1 percent.
Banks have a taken a battering this year over investor concerns about the extent of their exposure to products linked to the U.S. subprime lending market and the credit squeeze.
The DJ Stoxx European banking sector index has lost 15 percent so far in 2007, making the sector the worst performer so far this year in the 16 groups of the DJ Stoxx 600 index.