Weaker dollar pushes Eurostocks off 28-month peak

European shares ended marginally down yesterday as a further strengthening in the euro drove car exporters like Renault lower, while heavily-weighed energy stocks were hit by a new drop in crude oil prices.

French heavy engineering firm Alstom slid 13.6 per cent to €0.51 after Deutsche Bank slashed its price target to €0.18 from €0.35, saying there was a strong chance of a negative surprise in the company's first-half earnings report later this week.

The FTSEurofirst 300 index of pan-European shares shed 0.08 per cent to 1,033.66 points, pulling back from a 28-month peak of 1,040.55 points set early in the session. The narrower DJ Euro Stoxx 50 ended 0.32 per cent lower at 2,898.2 points.

A paper-thin corporate and economic diary deprived investors of reasons to extend a rally that has lifted the benchmark FTSEurofirst by as much as six per cent over the past four weeks.

Some strategists remained unconvinced the current rally would extend much more as they expect slowing economies worldwide and a near 80-per cent surge in oil prices between January and October to start hurting corporate results.

"The markets' current optimism will look more vulnerable as investors reduce profits forecasts for 2005," said strategists at investment fund Schroders.

Economists expected this week's fresh batch of US economic indicators - including industrial production tomorrow and the Philadelphia Federal Reserve survey of business conditions on Thursday - to point at milder growth than at the start of the year.

Schroders strategists said that in Europe the additional threat of a weakening dollar may be balanced by the fact that companies still have scope to cut costs.

Gnawing concerns over the US ability to fund its current account deficit pressured the dollar again yesterday, pushing the greenback to $1.2948 per euro, close to the all-time low of $1.3005 set last week.

There was anxiety among investors that a strong single currency would hit European exporters, the main drivers of growth in the region. Shares in car exporters Renault and Peugeot fell 1.7 per cent and 1.9 per cent.

In Dublin US Treasury Secretary John Snow repeated that the US administration remained committed to a strong dollar but believed the market should determine exchange rates.

Around Europe hopes that telecoms giant Vodafone would return more cash to shareholders helped prop London's FTSE 100 index 0.2 per cent higher, but Paris's CAC 40, Frankfurt's DAX and the Swiss Market Index fell between 0.2 per cent and 0.4 per cent.

A further retreat in oil prices helped limit market losses although it pressed on heavily weighted oil stocks like Shell whose shares slipped 0.7 per cent. US light crude pulled further away from last month's record peak above $55 a barrel to trade below $46 a barrel.

Among the few European companies reporting yesterday, shares in Italian jeweller Bulgari rose five per cent after its third-quarter net profit rose 50 per cent.

Elsewhere, takeover speculation propped up Thales but share gains were limited to 0.7 per cent amid talk that Berlin would resist a French plan to merge the defence electronics firm with European multinational aerospace giant EADS if it threatened to tilt the ownership structure of EADS in France's favour. EADS shares shed 2.1 per cent in Paris and 2.4 per cent in Frankfurt.

Meanwhile shares in advertising major Havas fell 2.1 per cent after weekly newspaper Le Journal du Dimanche said Havas, which is seen as vulnerable to a takeover, was looking for a way for top shareholder Bollore to exit its 22-per cent stake.

In Wall Street the Dow Jones industrial average was up 0.02 per cent to 10,540.4, while the technology-laced Nasdaq Composite Index inched 0.04 per cent higher at 2,086.2.