By Amanda Cooper

LONDON, Jan 7 (Reuters) - European shares ended a choppy session virtually unchanged on Monday as gains in defensive stocks such as telecoms and healthcare were eclipsed by a soft performance on Wall Street and a slide in crude oil.

After last week's weak U.S. employment report, equity investors sought out perceived safe-havens, boosting shares in Swiss food producer Nestle <NESN.VX>, while drugmakers GlaxoSmithKline <GSK.L> and Sanofi-Aventis <SASY.PA> were also among the top gainers, along with German utility E.ON <EONG.DE>.

A sharp reversal of an early rally on Wall Street quickly sapped gains from the FTSEurofirst 300 index <.FTEU3> of top European shares. The index ended 0.01 percent higher at 1,457.79 points, having swung between gains of 0.5 percent and losses of as much as 0.6 percent earlier.

Last week the index fell 3.2 percent as the December U.S. employment report showed the slowest job growth in over four years and a rise in the unemployment rate to a two-year high, which rekindled fears of a U.S. recession.

The prospect for a slowdown in growth weighed on retailers in Britain, particularly.

"The market is pretty nervous," said Henk Potts, a strategist at Barclays Stockbrokers

"We think it's going to be another volatile year, which is something investors will have to deal with but the central banks' ability to cut interest rates should smooth the way a bit and we still remain positive."

Nestle was the biggest positive influence in a weaker broader market, rallying 2.2 percent, while France's Danone <DANO.PA> gained 3 percent, and Anglo-Dutch group Unilver <UNc.AS> rose 2.6 percent.

Among telecoms, Spain's Telefonica <TEF.MC> and France Telecom <FTE.PA> both rose 3.7 percent, and Deutsche Telekom <DTEGn.DE> gained 2.9 percent.

GlaxoSmithKline, AstraZeneca and Sanofi-Aventis rose between 2.8 and 3.5 percent.

Oil and gas producers stayed in positive territory in spite of a 2.5 percent drop in the price of crude oil after a series of positive broker notes on the sector.

Global equity strategists at Citigroup upgraded the energy sector to overweight from neutral.

"We suggest that the direction of global equity markets in 2008 will reflect the battle between two contradictory forces -- earnings downgrades and cheap valuations," the Citigroup strategists said.

"We think that cheap valuations should win out (just) and drive the global equity market up by around 10 percent in 2008, but it will be a volatile ride."

BP <BP.L> was up 1.5 percent, Total <TOTF.PA> gained 2.1 percent, and Royal Dutch Shell <RDSa.L> was up 1.8 percent.

The FTSEurofirst rose just 1.6 percent last year in its worst yearly performance in five years, though in 2008 a 3.6 percent fall has already wiped out those gains.

On Monday, 12 of Western Europe's 16 major index benchmarks were in the red.

"We've had a huge barrage of very bearish statistics last week from the U.S., and it's obviously weighing on the market," said Edmund Shing, strategist at BNP Paribas, in Paris.

"The question this week is: 'Are we ready for a short-term bounce, or are we going to crack through the support levels and go further down?' My view is that we'll get a small bounce because we're getting oversold on a number of indices," he said.

Retailers took a beating on Monday, extending last week's losses after a report British chains Marks & Spencer <MKS.L> and Sainsbury <SBRY.L> might disappoint with their trading updates, due later this week.

Marks & Spencer shares were down 3.8 percent, while Sainsbury shares lost 3.6 percent. France's Carrefour <CARR.PA> fell 1.7 percent, and Britain's Tesco <TSCO.L> lost 2.3 percent.

The DJ Stoxx index of European retail shares <.SXRP> has shed almost 9 percent so far this year as concern builds over the sector's profitability in light of tighter consumer credit, a slowing economy, particularly in Britain, and weaker business and consumer confidence.

Euro zone investor confidence fell to its lowest in 2-1/2 years in January, according to a sentiment gauge of around 2,600 European investors by the Sentix group.

Around Europe, Germany's DAX index <.GDAXI> and France's CAC-40 <.FCHI> were both up 0.1 percent, while Britain's FTSE 100 index <.FTSE> fell 0.2 percent.

Interest rate decisions by both the European Central Bank and the Bank of England are due on Thursday.

Among other decliners, shares in aerospace group EADS <EAD.PA> fell 7.5 percent, hit by a report in Germany's WirtschaftsWoche magazine that cited a high-ranking manager at EADS as saying the group's A400M military transport aircraft faces fresh problems that may delay its first flight.

Mining and technology stocks -- among those worst hit on Friday by concerns over the economic outlook for the U.S. -- extended losses, with miner Rio Tinto <RIO.L> down 3.5 percent and software firm SAP <SAPG.DE> 3.6 percent weaker. (Additional reporting by Anshuman Daga in London and Blaise Robinson in Paris, editing by Will Waterman) (([email protected]; Reuters Messaging: [email protected]; +44 207 542 3424))

 
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    For rolling updates on what is moving European shares  
    please click on [STXNEWS/EU] 
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 For pan-Europeanmarket data and news, click on codes in  
 brackets: 
 European Equities speed guide...................<EUR/EQUITY> 
 FTSEurofirst 300 index..............................<.FTEU3> 
 DJ STOXX index......................................<.STOXX> 
 Top 10 STOXX sectors...........................<.PGL.STOXXS> 
 Top 10 EUROSTOXX sectors......................<.PGL.STOXXES> 
 Top 10 Eurofirst 300 sectors...................<.PGL.FTEU3S> 
 Top 25 European pct gainers.......................<.PG.PEUR> 
 Top 25 European pct losers........................<.PL.PEUR> 
    Main stock markets: 
 Dow Jones...............<.DJI>  Wall Street report .....[.N] 
 Nikkei 225.............<.N225>  Tokyo report............[.T] 
 FTSE 100...............<.FTSE>  London report...........[.L] 
 Xetra DAX.............<.GDAXI>  Frankfurt market stories[.F] 
 CAC-40.................<.FCHI>  Paris market stories...[.PA] 
 World Indices......................................<0#.INDEX> 
 Reuters survey of world bourse outlook..........<EQUITYPOLL1> 
 Western European IPO diary...........................[WEU/IPO] 
 European Asset Allocation.........................[EUR/ASSET] 
    Reuters News at a Glance: Equities...............[TOP/EQE] 
    Main currency report:...............................[FRX/] 
  Keywords: MARKETS EUROPE STOCKS/ =2