Financials were mixed amid mounting speculation that the European Central Bank was flexing its monetary muscles ahead of an interest rate decision later this month.

Deutsche Bank gained €2.04 to €99.10 but Commerzbank edged lower and there was clear weakness among insurers. Allianz came off €3.55 at €385.45 and Munich Re €3.59 at €331.51. Deutsche Telekom fell back as news from Germany's mobile phone licence auction now in its 12th day showed that the bidding had reached almost €44 billion to outstrip the €38 billion raised earlier this year by the UK licence auction. Telekom fell €1.30 to €48.30 and Mobilcom, in which France Telecom has a 28.5 per cent stake, lost €1.95 at €128.95.

Retailer Metro shed €1.78 at €43.47. The shares, which recently held on to Xetra DAX status, were hit by talk that it may face relegation from other benchmarks.

In Paris oil giant Total Fina Elf provided most of the day's upside supports. With Brent Blend, the North Sea benchmark price for oil, back firmly above $30 a barrel, oil shares were firm right across Europe. Total gained €5.20 or 3.1 per cent to €173.70.

In tech stocks, STMicro-electronics rose €3.45 to €66.55. France Telecom mostly absorbed concerns about the spiralling cost of the German mobile phone licences. The shares dipped 2 cents to €139.40. Amsterdam ended 0.66 better at 687.73 after a good showing by electronics heavyweight Philips and a bounce for UPC.

Telecoms leader KPN tracked the weak trend for European telecoms stocks, slipping €1.33 to €36.40. But Philips stayed firm, adding 75 cents at €50.05 following Monday's strong gains for US chip stocks. Narrower-than-expected losses for the second quarter of the year sent UPC up 15.8 per cent or €4 to €29.25 in some of the best volume of the day with 5.8 million shares changing hands.

Helsinki was dragged down by a weak showing in heavyweight Nokia while data security software house F-Secure took a beating after reporting widening first-half losses.

Telecom operator Sonera bucked the weak trend and rose €1.60 to €43.30 on continued speculation about its role in European consolidation following a report that Spain's Telefonica had joined the companies interested in launching a takeover bid for it.

Telecom equipment maker Nokia traded €1.48 lower at €44.70, giving up some of Monday's 3.3 per cent gains.