European stocks undecided

Trader on phones in front of DAX index board, Frankfurt stock exchange

LONDON, England (Reuters) -- European shares treaded water on Monday after an uninspiring opening on Wall Street, with German auto giant DaimlerChrysler and Finnish mobile manufacturer Nokia among the few standouts in a holiday-thinned market.

By 1415 GMT, the FTSE Eurotop 300 index of pan-European blue chips was down 0.2 percent, while the narrower DJ Euro Stoxx 50 index dipped 0.05 percent.

On Wall Street the Dow Jones industrial average was up 0.15 percent and the tech-studded Nasdaq eased 0.6 percent.

The London Stock Exchange, Europe's biggest, was closed for a bank holiday and will remain so on Tuesday, as Britons celebrate Queen Elizabeth II's 50 years on the throne. (more)

Nokia was one the biggest losers, falling 3.5 percent by mid-afternoon and adding to a loss of 36 percent since it warned on 2002 sales in April.

Persistent weakness in the tech sector has heightened concerns that Nokia could issue another warning when it announces its mid-quarter update on June 11.

Leon Pederson, head of equities at Nordea Investment Management, said the stock could be set for a re-rating in the short-term.

"We think the structural problems in the telecoms industry will continue for the longer-term, but the value of companies like Nokia are probably in line with that scenario so we've probably seen the worst. We are gradually considering whether to neutralise at the moment," Pederson said.

Swedish rival Ericsson jumped 1.8 percent after news late on Friday that the group was drumming up support for its looming $3 bn rights issue by examining how to narrow the differences in voting rights of its two share classes.

The company will discuss the issue at an extraordinary shareholder meeting on Thursday amid growing concern by instutional investors about the difference in the voting rights.

Elsewhere, DaimlerChrysler accelerated after Chief Executive Juergen Schrempp said the carmaker was struggling to satisfy demand for its new Mercedes E-Class and its Chrysler unit could post a profit this year if the U.S. upturn persists.

The shares rose 1.4 percent.

Rival German car maker Volkswagen AG was down 1.6 percent shortly after announcing it planned to recall 950,000 cars due to brake problems.

Dutch telecoms firm KPNQwest lost two-thirds of its market capitalisation after filing for bankruptcy on Friday. The company failed to raise funds to keep its operations running as heavy debt and waning revenues brought the former high-flier to a dramatic end.

Economic data

Last week the FTSE Eurotop 300 index fell 1.89 percent to seven-month lows amid worries about simmering tensions in the Middle East and Asia and on concerns that the nascent economic recovery will not revive corporate profits any time soon.

Earlier on Monday a key gauge of European manufacturing activity helped alleviate some concerns over profits by showing a slight increase.

The Reuters Eurozone Purchasing Managers' Index rose to 51.5 in May, the highest since February 2001, after edging above the 50 level that divides shrinkage from growth to 50.7 in April.

"We got some positive news from the PMI index, but by and large there is still negative sentiment in the market due to the political uncertainty," said West LB Panmure equity strategist Martin Gilles.

"There are also still some worries about medium-term prospects for the U.S. economy," he added.

Analysts said U.S. data showing the Institute for Supply Management's index of manufacturing activity rose to 55.7 in May from 53.9 a month earlier was likely to support the market towards the close.

"The data is stronger-than-expected ... It probably means people will revise up Friday's jobs data, which will be the highlight of this week's data," said Marc Chandler, currency strategist at HSBC Capital Markets.