(Reuters) - European shares were flat on Monday, with some optimism about the imminent fourth-quarter U.S. earnings season offset by GlaxoSmithKline (GSK.L) leading the healthcare sector down after the release of a mixed batch of clinical trials results on a key new lung drug.
At 0959 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.03 percent at 1,014.07 points, in choppy trading, after rising 1.2 percent in the first week of 2012.
Aluminum company Alcoa (AA.N) kicks off the fourth-quarter U.S. earnings season after the market closes. Banking heavyweight JP Morgan (JPM.N) is among those reporting later in the week.
JP Morgan is likely to have done reasonably well, and that may result in some short-term strength for the banks, though it doesn't mean the banks are out of the woods by any stretch of the imagination, said Jeremy Batstone-Carr, strategist at Charles Stanley.
He added: Valuations look supportive, but earnings expectations are continuing to be reduced. I find it hard to see where near-term upside is going to come from. The low (trading) volume suggests investors remain extremely wary of the outlook.
Italy's biggest bank, UniCredit (CRDI.MI), fell 8 percent, after suffering double-digit losses for three straight days last week, when it announced a massive discount on a rights issue. But other banks were mixed.
GSK fell 2.6 percent after the release of a mixed batch of clinical trials results for its new once-a-day inhaled lung drug Relovair, for which it still plans to seek regulatory approval in mid-2012.
The STOXX Europe 600 Healthcare Index .SXDP fell 0.7 percent.
On the upside, Renault (RENA.PA) rose 2 percent, after Citigroup upped its rating to buy from neutral, citing valuation and the company's growing non-Europe focus as positive factors.
The STOXX Europe 600 Autos index .SXAP rose 0.3 percent.
EURO ZONE CRISIS
The euro zone crisis remained a key concern for investors, and strategists were not optimistic that anything significant would emerge from a meeting later in the session between German Chancellor Angela Merkel and French President Nicolas Sarkozy.
The German and French leaders meet on Monday to discuss ways to boost growth in euro zone states struggling to overcome the sovereign debt crisis and rising unemployment, and finalize a deal to increase fiscal coordination within the currency union.
The FTSEurofirst 300 .FTEU3 has risen for three straight weeks, but further upside may be limited, say technical analysts.
Fears of a full-blown break-up of the euro zone have receded, although it would be premature to assert that the region's troubles are even close be being overcome, said Bill McNamara, technical analyst at Charles Stanley.
Technically, the salient point is surely that the index's medium-term downtrend remains in place and it is also worth noting that the retreat from last week's highs (at 1028) looks a lot like a reaction to resistance in the form of the October highs, at 1028.48. We really need to see a close above 1040 or so to persuade us that a break-out is underway.