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Europe Shakes Off Wall Street's Blahs

But observers here worry about a correction in the U.S. and a wage settlement in Germany.

FRANKFURT -- Europe mostly ignored Wall Street's losses, as most bourses showed modest gains.

But the overall market remained cautious, with volumes light and indices confined to tight ranges. Some cash-rich investors were placing some bets after recent losses, hoping that Wall Streeters will awake in a bargain-hunting mood and send the

Dow

and

TST Recommends

Nasdaq

higher.

Dutch insurer

Aegon

(AEG) - Get Report

surged 6.2% on news that it will buy U.S.-based

TransAmerica

(TA) - Get Report

for $10 billion in stock and cash. Another big winner was French food retailer

Carrefour

, up 8.8% after reporting pleasing results and a 6-for-1 stock split. And U.K pharmaceuticals firm

Glaxo Wellcome

(GLX)

rose 1.7% after beating earnings expectations.

But the soaring U.K. telecom sector fell prey to mild profit-taking.

Cable & Wireless

(CWP)

slipped 3.1%,

Colt

(COLTY)

dropped 3.6% and

Orange

(ORNGY)

retreated 2%.

In Frankfurt, the

Xetra Dax

was up 41 points at 4862, while in London the

FTSE

was down 11 at 6066 and in Paris the

CAC

was up 23 at 4009.

The calm here could turn nasty quickly if Wall Street resumes Wednesday's slide.

S&P 500

futures were up 3.30 points at 1232.60. The U.S. long bond was little changed in overnight trading, yielding 5.30%. The dollar was up against the yen at 119.78 and little changed against the euro, which was trading at $1.1229.

Nick Glydon, technical analyst at

Robert Fleming Securities

in London, is advising clients to wait for even lower prices. "It is still looking pretty worrying," he said. "It would take quite a lot for the markets to turn bullish again. There is a chance we are going to retest October lows."

He says several European indices are near important support levels, including the CAC at 3960 and the DAX at 4750. If Wall Street continues down, he thinks a break is likely. He continues to contend that a key support level for the U.S. market is the S&P 1200 marker.

Markets here also were keeping an eye on the

European Central Bank

, whose policymaking Governing Council is meeting in Frankfurt today. But most do not expect a change in rates, and a growing number of economists think chances of a rate cut soon are

slim.

The market also was digesting an extremely important overnight pay agreement for German engineering and metal workers in the key region of Baden-Wuerttemberg. The agreement could have widespread

ramifications across Europe. The pay deal calls for a 3.2% wage hike, a one-off 1% bonus and a one-time payment of 350 German marks. (Hmmm. Not euros?)

The agreement was richer than expected, and management negotiators say it will end up costing jobs. Usually, when one region accepts an agreement, it is adopted by the rest of the Germany. But management today is loudly urging other regions not to sign on, and news reports on German TV indicate the powerful

IG Metall

union is unhappy with that advice. Any sign that a national wage agreement is in trouble would likely be negative for markets.