European shares inch down

European equities closed slightly lower following thin trading and few major moves yesterday, with oil shares down on a retreat in oil prices, but dealers expected the broader market to stay trapped in a narrow range.

"Rising oil prices have made life pretty bad for companies, but people seem to be saying that at least it's not getting worse," said the head of sales at a European brokerage.

By 1545 GMT, the FTSE Eurotop 300 index of pan-European blue chips was down 0.2 per cent at 962.4 points, failing to hold onto slim gains after rising to 967.34.

Heavily weighted oil firms led the day's losers. BP lost one per cent, and Royal Dutch/Shell eased 1.1 per cent, according to preliminary closing figures.

Elsewhere, Telekom Austria rose 2.6 per cent after posting second-quarter core earnings ahead of market forecasts, but mining company Anglo American dipped 2.6 per cent following reports of a diamond miners' strike in Botswana.

Market volumes remained lacklustre at €1.9 billion as participation was hit by the summer holiday season. Market breadth was in favour of winners, with 178 stocks advancing, while 114 fell and 20 were unchanged.

"The bounce we are seeing is mostly a technically driven bounce, because we were getting to very oversold levels in all the indexes," said Daniel Birch, a strategist at brokerage Execution.

The narrower DJ Euro Stoxx 50 index fell 0.26 per cent to 2,655.3 points. The Eurotop 300 is up three per cent from a 2004 low of 934.7 points last week, although still flat for the year.

Markets have been under pressure, even though the majority of European companies have met second-quarter earnings estimates, as investors fret over cautious outlooks and high oil prices.

"The underlying factor is that profit margins might not get a lot better than they are, and the interest rate environment is going to be less supportive," said Michael MacPhee, a fund manager at Baillie Gifford in Edinburgh.

"So, one has to cope with two headwinds." Around Europe, Frankfurt's DAX eased 0.1 per cent, London's FTSE 100 was flat, Paris's CAC-40 was up 0.1 per cent and Zurich's SMI lost 0.26 per cent.