Europe stocks dip on oil sell-off
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LONDON, England (Reuters) -- European blue-chips ended down on Wednesday as oil companies came under the hammer due to a broker downgrade and to investor worries about the damage to their profits from the weak dollar.
But telecoms was a bright spot, led by Nokia with gains of 2.1 percent after investment banks JP Morgan and Dresdner Kleinwort Wasserstein raised their recommendations for the world's top handset maker to "overweight" from "neutral."
The FTSE Eurotop 300 index of pan-European blue chips ended 0.57 percent lower at 966.88 points, down from an earlier fresh 16-month high of 975.80. Amid good volumes the number of losers to gainers was around three to two.
The narrower DJ Euro Stoxx 50 index gave up 0.83 percent to 2,782.52 points.
"The focus is on the currency. People are wondering if we might see... a rate cut to counteract euro strength," said Michaela Marcussen, associate director at SG Asset Management.
"Parmalat is a dampener, people are still talking about trouble for the banks and especially for the Italian market."
Worries about exposure to insolvent food group Parmalat hit Italian banks, and the benchmark MIB index fell 1.55 percent to 27,032.
Capitalia and Banca Intesa fell 7.5 and 6.9 percent respectively after a newspaper reported that they were in talks to buy back bonds issued by Parmalat, raising fears they would suffer heavy charges.
Capitalia later denied the report.
Oil slick
Oil companies came under pressure after Smith Barney downgraded the sector, citing lower oil prices in the first half of this year and the weak dollar.
On Tuesday the euro had climbed to a new high of $1.2812, and sterling surged to 11-year highs against the dollar.
BP fell 2.1 percent after Smith Barney downgraded it to "sell" from "hold." Italy's Eni gave up 3.1 percent after it was cut to "hold" from "buy."
France's Total and Royal Dutch Shell lost 2.5 and 1.7 percent respectively after the bank downgraded them to "hold" from "buy."
British oil companies helped pushed London's FTSE down 0.71 percent to 4,473.0 points. France's CAC gave up 0.9 percent to 3,563.51, and the Swiss SMI ended 0.24 percent lower at 5,583.4.
Germany's blue-chip Dax index ceded 0.77 percent to 4,004.40 points despite the best efforts of Lufthansa.
The German airline jumped 6.8 percent after the company said it would break even at the operating level in 2003 and that euro strength against the dollar would have "no material impact" in the short term.
British Airways surged 11.5 percent to the highest level since the September 2001 attacks on the United States, after the company said full-year revenues would probably be better than expected.
In New York, the blue-chip Dow Jones industrial average was down 0.21 percent at 10,492.0 points and the technology-heavy Nasdaq Composite Index was up 0.35 percent at 2,064.64.
The European Central Bank meets to discuss interest rates on Thursday and is expected to keep them at record lows of two percent.
European markets will be watching for comments on whether euro strength could prompt a rate cut.
"Any sort of hint that the dollar collapse could persuade the ECB to cut rates would be a boost for European equity markets," a trader at a German bank said.
Elsewhere Deutsche Bank gave up 2.7 percent after it agreed to cooperate with regulators seeking information about its close ties with Parmalat.
British aerospace-to-medical engineer Smiths Group was down 4.2 percent after investment bank Morgan Stanley cut its rating and share price target to account for the the weaker dollar.
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