European stocks end steady, oil fall lends support

A slide in oil prices helped European shares hold their ground yesterday despite some patchy company reports, but traders were reluctant to take big positions ahead of a meeting of the US Federal Reserve today.

US light crude fell about 1.5 per cent to near $48 a barrel, more than $7 a barrel off its peak late last month, on expectations that growing supplies will see consumers through the northern winter.

Autos benefited from the decline in oil prices but utilities weighed as traders booked profits after Germany's RWE trimmed its net profit outlook.

By 1630 GMT, the FTSEurofirst 300 index closed unofficially 0.1 per cent weaker at 1,020.1 points on modest turnover of around €2.1 billion.

Last week the pan-European benchmark rose to a six-month high on relief that the US presidential election delivered a clear and speedy result.

The DJ Euro Stoxx 50 index slipped 0.2 per cent to 2,867.2 points.

"We only had one stronger growth swallow with US payrolls last week and the big question is whether this is going to make a summer," said economist David Brown at Bear Stearns. "It's very ironic because here we are a week after a (US President George W.) Bush election victory and stronger payrolls data but stocks are still very diffident about pushing higher because investors are worried about expensive oil and the impact of the weaker dollar."

The dollar edged off its lows against the euro, gaining ground after Germany's ZEW sentiment index showed confidence had plummeted to its lowest level in almost two years in November.

But the euro was soon trading back above $1.29 as traders increased their bets that the dollar will slip further as uncertainty lingers about Washington's ability to reduce its deficits.

In New York, stocks struggled to extend last week's strong rally despite the oil price fall.

The blue-chip Dow Jones industrial average was 0.2 per cent weaker at 10,376 points, while the Nasdaq Composite Index was also 0.2 per cent lower at 2,035 points.

Markets are awaiting quarterly numbers from networks giant Cisco Systems after the close yesterday and the US Federal Reserve's open market committee meeting today. The Fed is widely expected to raise borrowing costs by a quarter of a percentage point to two per cent but opinion is divided over whether another rate rise will follow in December.

Around Europe, London's FTSE 100 closed flat, while Paris's CAC-40 ended down 0.2 per cent. In Zurich, the SMI shed 0.5 per cent and Frankfurt's DAX closed 0.1 per cent lower.

Among heavyweight companies reporting yesterday, Infineon closed 1.6 per cent weaker after the German chipmaker said it expected its earnings and sales to decline in the current quarter after its September quarter earnings were hit by charges.

Meanwhile, Europe's third-biggest utility RWE stuck to its single-digit profit growth forecast for the full year, despite a market-beating nine-month operating profit.

The stock fell 3.4 per cent to €41.85 as the group tightened its net outlook to the lower end of its forecast range. Rival E.ON fell one per cent to €63.21.

On a brighter note, Capgemini, Europe's biggest computer consultancy jumped 10 per cent to €26.01 on news of forecast-beating quarterly sales helped by large outsourcing contracts. Danish pharmaceuticals group Lundbeck also rose, up 5.1 per cent after its third-quarter earnings topped forecasts, while stock market operator Deutsche Boerse added 2.2 per cent after posting a forecast-beating third-quarter earnings before interest and tax and gave a bright 2005 outlook.

Among auto companies benefiting from the dip in oil prices, DaimlerChyrsler added one per cent, while other big oil users also gained. Germany chemicals firm BASF rose 0.7 per cent and British Airways closed 1.5 per cent firmer.