Choppy trading follows OPEC move on oil prices

OIL stocks suffered another attack of self-doubt as the countdown to the European results season coincided with an uncertain day for international crude prices.

Sector falls of 2 per cent were common until most shares moved off the bottom towards the close of the session. Royal Dutch fell 96 cents at €69.74 and Total Elf Fina shed €1.30 at €165.10. Repsol and Eni lost 84 cents at €19.37 and 16 cents at €6.23 respectively.

This reaction was partly in response to OPEC's latest display of determination to counter spiralling crude prices. OPEC output is going up by some 2 per cent.

After initial softness Brent Blend steadied but the news served as a reminder of the top-of-the-cycle theories for oil prices that periodically lead to choppy trading in the sector.

There was also a strong suggestion in the market that some of the so-called safe-haven investment money that sought the oil sector earlier this year to escape TMT volatility was starting to creep away.

Opec's moves were good news for airline stocks and KLM in particular where sentiment was bolstered by stronger-than-expected second quarter results. The group's recent run of load factors has been impressive but shares have been weighed down by fuel cost scare stories plus the collapse of merger talks with British Airways. The shares gained €1.25 or 6.6 per cent to €20.75.

In the motor sector positive broker comment got firmly behind Volkswagen. Deutsche Bank responded to VW's third quarter figures with an upgrade to buy from market perform and an ambitious shift in earnings forecasts. As a result the investment bank's target price has gone up from €55 to €65.

VW gained €1.29 at €56.39 while DaimlerChrysler, a weak market since last week's third quarter results, added €1 at €52.30. Renault overcame early profit-taking inspired by Friday's near 6 per cent rally to improve a further 35 cents to €54.25 after gaining promotion to SG Securities model European portfolio.

Telecoms showed signs of frayed nerves. Ahead of today's third quarter statement, top operator Deutsche Telekom lost €1.26 at €43.85 while KPN fell 81 cents at €25. France Telecom rallied from an early low of €124.60 to close €1.60 better at €127.50.

Alcatel, which faced high-profile volatility last week following disappointing figures from Canadian leader Nortel Networks, stayed dull among equipment makers. The shares lost 2.50 at 71 ahead of today's third quarter results.

Financials were in focus with ING putting on 4.5 per cent to 80.10 after Morgan Stanley Dean Witter raised its price target to 100 while rating the stock an outperformer. Commerzbank eased 0.1 per cent at 32.10 as Bankgesellschaft Berlin cut its recommendation, saying that Friday's disappointing results from its Polish subsidiary, BRE, would burden the group's results.