European Stock Market Volatility on Soaring Commodity Prices (MarketWatch)  (26-10-2007)

LONDON (MarketWatch) -- European stock markets were governed by volatility on Friday morning as gold and oil prices soared.

Crude rose to a record high of $92.22 a barrel in electronic trading, while gold futures reached a new multiyear high of $782.20 an ounce as worries about energy inventories and Middle Eastern tensions abounded.

The pan-European Dow Jones Stoxx 600 index slipped 0.3% at 380.88 on a weaker financial-services sector and losses from drug makers.

Among banks, UBS and Credit Suisse were down more than 1.7% each, while in pharmaceutical companies, GlaxoSmithKline lost 1.6% and peer AstraZeneca slipped 1.1%.

Energy shares were among gainers, however, with Royal Dutch Shell and BP both gaining more than 1.1%.

BP also confirmed after the close of trading on Thursday settlements totaling about $374 million stemming from a deadly refinery blast in Texas City, improper commodity trades and an oil pipeline spill in Alaska.

Of miners gaining on Friday, shares in BHP Billiton rose 1% and Rio Tinto shares increased 1.8%.

Turning to national European indexes, the U.K. FTSE 100 index inched down 0.1% at 6,572.40, the German DAX 30 index lost 0.1% at 7,923.91 and the French CAC-40 index declined 0.2% at 5,747.30.

On Thursday, U.S. stocks finished modestly weaker as investors took on board a mix of economic data, record oil prices and corporate earnings.

Earnings news was focused in the auto sector, with Peugeot and Renault getting a lift.

Peugeot's 4.1% share rise followed a 12% increase in third-quarter revenue to 14.02 billion euros, well above analyst estimates. The increase was due to higher new vehicle sales, stronger prices and an improved product mix.

Renault shares rose 3.2%. Investors took on board a statement that the second-half contribution to Renault's income from Japanese car maker Nissan is likely to be 329 million euros. Renault holds 44% of Nissan.

Renault made the statement after Nissan posted a 12% rise in operating profit to 218.7 billion yen in its fiscal second-quarter and stuck to its fiscal-year forecasts.

Volkswagen reported earnings. The German auto maker's sales rose 5.1% and net profit more than doubled to 2.91 billion euros. Shares inched down 0.2% after recent strong gains.

Dutch supermarket group Ahold also reported earnings. Shares fell 5.6% after the firm said third-quarter U.S. sales dropped 5.1% to 3.4 billion euros.

Margins will continue to be impacted by investments related to an improvement program at Stop & Shop and Giant-Landover, Ahold said. Total sales rose 1.1% to 6.3 billion euros.

As for deal talk, J Sainsbury shares fell 2.7% after the U.K. Takeover Panel set a deadline of 5 p.m. on Nov. 8 for the Qatari investment vehicle Delta Two to either make a firm offer for the British supermarket operator or walk away. Delta Two said it's in talks to raise more funding for a possible bid.

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