European stocks end at two-week low as oil nears $50

European stock indexes hit a two-week low yesterday as record high oil prices heightened fears of an economic slowdown and Wall Street fell on concerns about rising numbers of profit warnings.

Construction and building materials stocks bucked the weaker trend, however, after British cement maker RMC Group agreed a £2.3 billion takeover offer from Mexico's Cemex.

Oil prices jumped almost two per cent yesterday as unrest in Nigeria added to supply concerns from Iraq, Saudi Arabia and Russia.

US light crude hit a peak of $49.74 a barrel, the highest in the 21-year history of trade on the New York Mercantile Exchange contract, after fighting between Nigerian troops and militiamen in the oil-rich Niger delta prompted the closure of a small Royal Dutch/Shell production facility.

"US light crude came close to testing the key $50 level through the afternoon session, compounding the already downbeat mood that's prevailing amongst traders," said Geoff Langham, head of trading at CMC Group.

He said a reversal in oil prices "may be sufficient to protect equities on the downside, but another test of last week's highs look unlikely in the short term".

The FTSE Eurotop 300 index of pan-European blue chips closed 0.7 per cent lower at 985.3 points, its lowest close since September 9.

Turnover was modest at about €2.1 billion, while falling stocks outnumbered those that rose by almost five to one.

A week ago the Eurotop 300 hit its highest point in almost three months but failed to break out of a trading range, which has been tracking lower since April.

The narrower DJ Euro Stoxx 50 index fell 0.6 per cent to 2,725.1 points.

Auto makers were among the worst performers as investors worried that high oil prices would curb demand for popular but fuel-hungry vehicles as well as increase input costs.

"Energy-price inflation is less of a significant costs side worry for autos than for chemicals or engineering," Commerzbank Securities said in a note.

"However, the oil price is a major demand-side worry, particularly if consumers think it will remain high for some time. Already full-sized SUV and pick-up sales in the USA are suffering."

In New York, the blue-chip Dow Jones industrial average was 0.2 per cent weaker at 10,024.5 points, while the Nasdaq Composite Index shed 0.6 per cent to 1,868.9 points by 1616 GMT.