European stocks slip off highs

European shares touched a three-year high yesterday with ABN AMRO gaining as it looked less likely to spend cash to buy Italian bank Antonveneta, while Philips dipped on a warning of weaker demand.

Shares generally slipped in late trade as news of a larger than expected drop in US domestic oil supplies drove oil futures higher, rekindling concern about rising fuel costs and a hit on company earnings and consumer spending.

The drawdown pulled the FTSEurofirst 300 index 0.4 per cent lower to 1,132.26 points after peaking at 1,139.67. The narrower DJ Stoxx 50 shed 0.5 per cent at 3,147.55. The down-draught also hit Wall Street stocks. ABN was a top gainer propping up the financial sector. The share added 1.8 per cent as Italy's Banca Popolare di Lodi raised its offer for Banca Antonveneta to €27.50 per share, beating ABN's increased 26.50 bid.

Dealers and analysts said ABN might now choose not to raise its offer further. Rumours about HSBC making a bid for the Dutch bank also fuelled gains in ABN AMRO stock.

"The feeling now is ABN cannot win," Nigel Cobby, managing director of European equities at JP Morgan, said. "One suspects they will withdraw and probably sell the stake they've got and maybe use the capital to buy their own stock back."

A fall in the euro to a nine-month low against the dollar also boosted shares. "The stronger dollar is also good for the outlook for European profitability," Mr Cobby added.

UniCredito led bank gainers. Heavy institutional buying on hopes that its planned buy of Germany's HVB will generate more revenues helped lift it 4.9 per cent.

"The deal makes industrial sense. The price offered is fair. The synergies are probably underestimated," said analyst Leonardo Rubatto with SG Securities. "UniCredito is likely to pay some interesting dividends."

Elsewhere among financials, Swiss Re, which holds an investor day in New York, rose 0.7 per cent after confirming its financial targets and saying its property and casualty business continued to yield healthy returns.

Basic resources was the top gaining sector. Rio Tinto added 1.4 per cent and BHP Billiton 1.3 per cent.

Traders said the shares were "playing catch-up" after lagging the market in recent days.