European shares steadied Tuesday as earnings news offset fresh political uncertainty a day ahead of the euro zone leaders' meeting that many hope will take a big step toward solving the region's two-year-old debt crisis.
Strong corporate results from the likes of oil and gas firm BG Group (BG.L) and Deutsche Bank (DBKGn.DE), which both beat forecasts, helped underpin the market, after the market's recent two-day rally.
At 0824 GMT (4:24 a.m. EDT), the FTSEurofirst 300 <.FTEU3> index of leading European shares was flat at 988.89 points, after adding 1.1 percent in the previous session, off its lows but in choppy trade.
Markets have risen ahead of the two-leg summit, fully expecting leaders to agree a comprehensive plan, in spite of clear differences on key elements including leveraging the bailout fund and Greek debt mark-downs.
A demand for signoff rights from German politicians on details of the plan, ahead of the Wednesday summit; combative comments from Italy's leader on the country's austerity reform plan and lack of agreement on changes to its pension system overnight were capping gains in early trade, traders said.
Whilst official comments have stated that good progress is being made, behind the scenes things look a little shakier, Capital Spreads dealer Jonathan Sudaria said.
German Chancellor Angela Merkel must face down rebels in her domestic Parliament once more to gain approval to increase the EFSF. Also, an emergency Cabinet meeting in Italy on implementing austerity measures proved fruitless and failed to allay fears of debt contagion, he added.
The structurally short position held by many buy-side investors had also helped to drive the recent rally, Jacob de Tusch-Lec, fund manager at Artemis, said.
People are underweight risk, keeping a lot of liquidity on the sidelines, so the market is trying to move higher on any hint of a credible resolution to the crisis.
Some funds were sitting on 20, 30, 40 percent cash, he added, which meant any deal on Wednesday that provides a legitimate road-map out of the crisis could lay the groundwork for further gains, even as, currently, we're all trying to trade sentiment rather than the underlying asset.
If they come out with a plan that isn't half-baked, that has some kind of shelf life and has a framework that gives some clarity, then you can start modeling what financials are worth. At the moment, you don't know what numbers to put in.
Energy stocks provided the major support as the market bucked an early, broad-based sectoral decline, buoyed by corporate news from heavyweights BG Group and BP (BP.L).
BG posted forecast-beating third-quarter profits after a strong performance at its LNG business, while BP predicted a return to production growth and increased dividends, even as it posted lower quarterly profits.
Both results helped the STOXX Europe 600 Oil & Gas <.SXEP> index rise 1.7 percent.
Earnings news in other sectors was more mixed, however.
Among the banking sector, Swedish lender Swedbank (SWEDa.ST) rose 6 percent after the cash-rich firm posted bumper third-quarter profits, while UBS (UBSN.VX) also beat forecasts, but warned on its outlook.
Fellow investment bank Deutsche Bank (DBKGn.DE), up 0.4 percent, also beat forecasts but warned on the outlook for investment banking and flagged the potential for more job cuts.
That theme continued into the tech sector after STMicroelectronics (STM.PA) posted a drop in quarterly sales overnight, and said the outlook for the fourth quarter was weak.
(Editing by Mike Nesbit)