European shares pare losses by close

European stock markets pared most of the day's losses towards the close yesterday, supported by a rise on Wall Street, and as Philips led gainers.

Philips rallied 2.6 per cent to €26 after Europe's biggest consumer electronics group beat fourth-quarter profit and sales forecasts and reiterated its 2006 targets and raised its dividend.

By 1640 GMT, the pan-European FTSEurofirst index of 300 shares was nearly 0.3 per cent weaker at an unofficial close of 1,280.5 points, its lowest since December 30.

The index recovered from its intra-day low of 1,270.9 points as US stocks rose after Ford Motor Co.'s stronger-than-expected earnings.

"Earnings growth is still improving and Europe has the advantage to be late relative to the US economic cycle and we expect positive news regarding European growth," said Thierry Lacraz, a European strategist at private bank Pictet & Cie.

"We are overweight on everything related to capex and investment decisions made by companies," said Mr Lacraz, adding that his firm is overweight on industrial goods, oil and gas, metal and construction material sectors.

His firm is avoiding retail, automotive, chemicals and utilities stocks due to high oil prices.

Oil prices briefly topped $69 a barrel, their highest since early September, before easing 0.7 per cent to $68.

The DJ Stoxx European travel and leisure sector index fell 0.7 per cent, with shares in Air France-KLM down 2.2 per cent and Lufthansa off 0.6 per cent.

US stocks gained by the close of European markets, with the Dow Jones industrial average up 0.5 per cent at 10,724.3 points. On Friday, Wall Street suffered its biggest loss in nearly three years when the Dow fell two per cent.