Europe's leading shares closed flat on Thursday as weak earnings from companies in the region capped momentum on an index which is hovering near the highs achieved after central bank action last month.
The FTSEurofirst 300 index provisionally closed 0.2 percent higher at 1, 121.12 points, near the highs reached when the ECB announced its bond-buying plans in early September.
Earnings Season Woes
The biggest fallers on the index were hurt by earnings worries. Akzo Nobel
Luxury goods company Richemont
Food giant Nestle also reported third quarter earnings showing slow sales growth, especially in Asian markets.
Stocks in hedge fund Man Group plummeted after the firm announced on Thursday that its clients continued to pull money out of the fund.
European companies are expected to grow earnings by 7.8 percent in the third-quarter and, although the results season is in its infancy, corporates in Europe have reported a 1.1 percent contraction in earnings, according to Thomson Reuters Starmine data.
"Earnings forecasts have come down but we do not think they have troughed yet, " Andrew Cole, a fund manager at Baring Asset Management, which has 31 billion pounds ($49.9 billion) of assets under management, said.
"Those stocks that have either been defensive or the true stellar growth plays, where investors have paid a high price for growth, and have missed expectations have seen their shares hit badly, " he said.
Cole said he has been putting cash to work in sectors and areas that have been less loved, but not including Europe.
Despite relatively cheap valuations, investors remain cautious over their exposure to euro zone stocks with many fund managers putting recent gains mainly down to the covering of short positions.
"There has certainly been a rotation into cyclicals but whether that is because investors are becoming more optimistic about growth in 2013 or they feel defensives have got too expensive relative to the cyclical sectors remains to be seen, " a London-based trader said.
Nokia, among the most shorted stocks across Europe, closed higher after it released third-quarter results, although the shares are down around 40 percent in 2012.
The mobile phone handset maker reported another quarterly loss and dwindling cash reserves on Thursday, but results were better than expected.
Pitfulls remain for investors in Europe, particularly in the banking sector which has benefited most from the ECB action.
That was illustrated by a fall in Italy's Banca Monte dei Paschi di Siena shares after Moody's cut its rating by two notches overnight saying the bank may still need to ask for outside help.
Investors focused on the EU summit on Thursday in Brussels, where they will try to bridge deep differences over plans for a banking union, although no substantial decisions are expected.
European leaders are expected to discuss a region-wide banking supervisor , despite a Financial Times report that the EU's top legal adviser has found the current plan may be "illegal".
No final decision is expected to be reached at the summit, a factor that is increasing concerns about complacency in tackling the euro zone's debt problem .
European officials are not expected to discuss Greece, Spain or Cyprus at the summit, according to Reuters. The three countries and their debt issues are not on the official agenda. Meanwhile, a 24-hour general strike has been called on Thursday in Greece.
At a Spanish bond auction on Thursday the country's benchmark 10-year bond yield fell to an average of 5.458 percent from a previous figure of 5.666 percent in September.
Credit ratings agency Moody's recently affirmed the country's investment-grade rating. Nicholas Spiro, managing director at Spiro Sovereign Strategy believed the auction was well received as markets believe the key domestic and external pieces for a bond-buying program for Spain are falling into place.
"While political pressure on Spain to request a bond-buying program is mounting, market pressure on Spain is waning, " he said in a morning note.
"The decision by Moody's not to 'junk' Spain has, paradoxically, made it even less likely that the Rajoy government will apply for a bond-buying program any time soon. Madrid still has serious reservations about the conditions and effectiveness of any bond-buying program and feels it has more to gain from deferring a request for aid."