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July 26 (Reuters) - European shares were flat on Friday,

set for a modest weekly loss as a mixed batch of corporate

earnings left the benchmark index floundering for a clear

direction.

The pan-European STOXX 600 index was flat at 508.9

points by 0710 GMT and was set to log its second consecutive

week of losses after it hit its lowest over two months in the

previous session.

Mercedes-Benz dropped 2.2% after the German luxury

automaker narrowed its annual forecast for the profit margin in

its core car division.

The stock dragged the auto sector that lost 1.1%.

Capgemini lost 6.1% after the French IT consulting

group expects its annual revenue to fall compared with the

earlier expectation of at least maintaining stable growth.

On the flip side, NatWest ( NWG ) gained 8% after the

British bank said it would buy Metro Bank's mortgage portfolio

for 2.4 billion pounds.

Hermes gained 2% after the Birkin-bag maker

reported a 13% rise in second-quarter sales, demonstrating the

continued appetite from wealthy shoppers for its luxury

handbags.

EssilorLuxottica gained 6.4% after the eyewear

maker's revenue rose 5.2% in the second quarter, supported by

the Europe, Middle East and Africa (EMEA) region.