European shares were led higher by defensive healthcare stocks early today as banks shrugged off a big writedown at Royal Bank of Scotland, but gains were capped by weak commodities.
At 0841 GMT, the FTSEurofirst index of top European shares was up 0.2 per cent at 1,192.87 points in choppy trade, with advancers outpacing decliners by 1.6 to 1.
Sanofi-Aventis rose 3 per cent after its Multaq heart drug was granted priority review by US regulators. Novartis gained 1.6 per cent and GlaxoSmithKline rose 0.9 per cent.
Banks were mixed after Royal Bank of Scotland kept the sector's woes firmly in the spotlight, but its own results were not as bad as expected.
Oil slipped more than $1.5 to $118.41 a barrel.
"There's certainly some improvement in the short term picture, with falling oil and a rally in bonds providing a stimulus," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.
"There's going to be more speculation of ECB rate cuts later this year, and the fact that the market is more relaxed on stagflation worries than before takes the pressure off valuations to derate further," he said, but added that the economic outlook was not comfortable, and the fall in freight rates showed increased worry about emerging markets.
Across Europe, Britain's FTSE 100 was flat, while Germany's DAX and France's CAC were up 0.4 per cent.
Russian news agency Interfax reported that several Russian peacekeepers were killed when Georgian artillery shelled their base in Tskhinvali, the capital of Georgia's breakaway region of South Ossetia.
"Russian markets are down, possibly due to Ossetia and oil dropping further. We always have some sort of regional conflict and as long as the supply of oil is maintained, the impact of the conflict on western European markets should not be great," said UniCredit's Schwarz.
Russia's benchmark RTS stocks index fell 2.3 per cent.
RBS fell to a first half loss of £691 million, one of the biggest losses in corporate history but better than analysts' average expectations, after taking a £5.9 billion writedown on the value of risky assets.
RBS fell initially but was trading 2 per cent higher, UBS fell 2 per cent, Barclays fell 0.8 per cent and ING slipped 0.9 per cent.
"Some solace could be taken from the fact that these writedowns may provide another contribution towards the end of the credit fallout, but there remains much work to be done," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.
BG Group gained 2.3 per cent after the group struck oil in Brazil, while Swiss luxury goods group Richemont gained 1.9 per cent and British American Tobacco fell 3 per cent after Richemont said it was creating a new investment vehicle to hold its near 20 per cent stake in BAT.
Shareholders will be given 90 per cent of its BAT stake, Richemont said.
Reuters