European stocks weighed by oil, miners

Losses in the heavyweight energy sector led by BP knocked European stocks yesterday, while autos got a boost from strong car sales data and a broker upgrade.

A slide in metal prices to three-month lows driven by a stronger dollar hit miners BHP Billiton, Anglo American and Antofagasta, which lost two to three per cent each.

Steel makers were weaker with German industrial conglomerate ThyssenKrupp falling three per cent after it missed second-quarter pretax profits. Anglo-Dutch steel firm Corus also fell 3 per cent.

By 1100 GMT, the FTSEurofirst pan-European 300 index was 0.5 per cent weaker at 1,073.5 points, giving up Thursday's gains. The narrower DJ Stoxx 50 index fell 0.5 per cent to 2,976.9 points.

Fund managers said the decline in oil prices may be temporary and markets remained concerned over higher fuel costs.

"The decrease in oil prices could help the economy in the mid-term view, but the energy complex is very volatile and this seems to be short-term noise," said Juergen Lukasser, a global fund manager for Constantia Privatbank in Vienna.

Topping the day's losers, BP and Total fell 1.5 per cent each as crude oil prices slumped to a three-month low near $48 a barrel on rising crude inventories, dampening hopes of bumper profit growth at these firms.

Skandia surged 19 per cent to 41.4 Swedish crowns after South Africa's Old Mutual confirmed it was in preliminary talks to buy the Swedish insurer. London-listed shares in Old Mutual fell six per cent to 122 pence on concerns it will have to issue shares to fund the takeover.

Swedish financial daily Dagens Industri said Old Mutual would bid 50 Swedish crowns a share for Skandia.

Around Europe, London's FTSE 100 index fell 0.6 per cent, Paris's CAC-40 lost 0.5 per cent and Frankfurt's DAX edged down 0.4 per cent.

Strategists at Smith Barney however said equities were supported by valuations and it forecast strong growth.

"European equities trade at valuations not far above the March 2003 lows," Smith Barney said in a note.

"Valuations are cheap relative to history, cheap relative to corporate and government debt and cheap relative to US equities. We expect strong corporate liquidity/action to drive a small rerating for European equities over the next 12 months."

Autos were among the top gainers, helped by the fall in oil prices, with DaimlerChrysler and Volkswagen putting on 0.5 per cent each.

Supporting the sector, data showed new car sales in western Europe rose 1.3 per cent last month - the first gain this year.

Adding to the positive tone, CSFB, which has been downbeat on the sector for months, struck a more optimistic note and raised its overall rating on European autos to "market" weight" from "underweight".

Among other gainers, Italian utility Edison rallied nine per cent to €1.84 after Electricite de France and Milan utility AEM agreed to pay €1.86 a share to its shareholders in a mandatory takeover.