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European Markets Close Weak

From Standard & Poor's European MarketScope

European indexes showed some recovery in afternoon trading. Petroleum stocks rose as oil was trading at U.S. $57.40 a barrel at the European close. Unexpectedly low EIA inventories showed a surprise draw in crude and gasoline stocks in the U.S. Meanwhile, weak trading on Wall Street leant little support to Europe, though core U.S. consumer inflation data confirmed that inflation is in check.

United Kingdom: The FTSE 100 came off lows in late trading as the rising oil price provided some support for heavyweight oil stocks: Royal Dutch Shell (RDS) (+0.49%), BP (BP)(-0.55%). In London, Vodafone (-0.58%) stayed out in the cold, as brokers downgraded their target prices on the stock following yesterday's comments on Japanese margins. Supermarket group Sainsbury's (-1.71%) retreated, despite broadly in line first half numbers, on disappointment over its outlook and the performance of its bank division. Scottish & Southern (+0.39%) reported first half figures in line with estimates with adjusted pretax profit up 25.5%.

Land Securities (+5.12%) rallied, lifting the rest of the sector, after announcing an 89% jump in first half pretax profit and saying it remains positive about the prospects for the business as a whole for this financial year. Lonmin (-1.11%) slipped on lower-than-expected fiscal year numbers. EMI (+4.51%) gained after saying Global Recorded Music declined only modestly in the first half and the group remains on track to deliver in-line fiscal year results. Slough (+1.49%) announced that it will acquire the Central European property development operations of Grontmij, for a provisional €19.5 million.

Germany: The Xetra-Dax ended weaker, hit by a weak outlook from utility RWE which presented nine months numbers in line with forecasts, but it said cost pressures are likely to affect fiscal 2005 profits. The RWE news hit E.On (EON)(-0.75%). October European car registrations were down 2.6% to 1.107 million units in the EU15+EFTA market: BMW (unch.), DaimlerChrysler (DCX)(-0.37%) and VW (-1.14%).

Commerzbank (-0.09%) was very volatile. The stock shot up almost 2% in early trading as brokers took a positive view on the group's proposed Eurohypo deal. However, unfounded rumors of a 50 million placement to finance the deal ate into these gains later. Altana (+0.56%) was amongst a handful of Dax gainers, bouncing back after a 6.74% plunge yesterday. The brokers cut targets on the stock. UBS also lowered targets on Postbank (-1.68%) and Bilfinger (-1.88%), while HSBC reduced its target for Deutsche Telekom (DT)(-0.83%). TUI (-1.52%) was hit as Morgan Stanley reinitiated coverage with an underweight rating, taking a cautious stance on the group's CP Ships deal.

France: The CAC 40 index (-0.68%) closed lower but off morning lows. Rising oil prices trimmed giant Total (TOT)(-1.30%) earlier losses. Pernod (+1.17%) recouped some of the loss suffered yesterday on the back of Diageo's disappointing results. The stock close was delayed ahead of the listing of 5.7 million new shares as of Thursday. Vivendi (V)(-2.37%) lagged, ahead of third-quarter figures tomorrow.

Amid lackluster registrations, French carmakers stalled: Renault (unch.) sales fell 11.6% while Peugeot's (-1.74%) fell 4.2%. Thales (+0.92%) was positive after saying it might offer a stake in BAE's Atlas Elektronic to rival bidder ThyssenKrupp, should its offer be accepted. Eurodisney (unch.) trimmed its fiscal year 2005 loss by 35% to €94.9 million. The market cheered Ipsos's (+2.85%) third-quarter sales growth and fiscal year revenues outlook of €700 million before the consolidation of MORI.

In other news, Danone (-1.24%) traded in the red after completing the sale of DS Waters to Kelso for €100 million. Geophysique (-3.13%) launched a €190.6 million rights issue at €51 per share to help refinance a loan for the acquisition of Exploration Resources. The market balked at Geophysique's (-3%) €190.6 million rights issue announcement, a larger than expected capital increase. Credit Agricole (+0.54%) planned to report third-quarter results after the bell. Also reporting tomorrow: Alstom, Dexia, Sodexho, Technip and Vivendi.

Elsewhere: In Milan, Piazza Affari remained below breakeven at the close. Oil prices boosted Saipem (+0.24%) and ENI (-0.26%) from intraday lows. Also, AEM Milano (-1.97%) took a hit after Citigroup revised the group's estimated earnings for 2005 and 2006 down by 8% and 2.5%, respectively. Generali (-0.12%) fell after buying about 36 million shares of Banca Intesa (+0.21%) (equivalent to 0.6% of the ordinary capital) from Commerzbank, raising its stake in the Italian bank to 7.27%. Prepared by Zaida Espana, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

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