Market Report - Europe

Frankfurt DAX: German shares failed to pare losses after hitting a record high in morning trade. A Bundesbank report hinting at a possible interest rate rise dampened market sentiment, while a mixed opening on Wall Street proved no help to the market.

The Xetra DAX, which measures all-day computer trading, lost 52.94 points, or 0.92 per cent, to close at 5,689.89 points.

Henkel lost 5.59 per cent after takeover rumours fuelled the stock by as much as 10 per cent on Wednesday. Hoechst was among the leading advancers, gaining 2.22 per cent.

Other featured shares included Volkswagen, which retreated to 1,748 deutschmarks having set its third consecutive record high at DM1,800. Rolls-Royce Motor Cars and Lamborghini.

Paris CAC-40: French shares ended nearly 1 per cent lower after early strength ebbed out of the market as investors took the view that near-term interest rate rises in Britain and continental Europe were increasingly likely.

The market also suffered from the uncertain outlook in Asia. Despite calm on foreign exchange markets, shares had trouble advancing as investors adopted a wait-and-see attitude toward Tokyo's promises to embark on economic reform.

PSA Peugeot Citroen closed slightly off after spending most of the day higher as the company reported to its suppliers on its cost-cutting plans aimed at trimming six billion francs over a full year from 1999. The shares ended at Ffr1,301, off 0.38 per cent.

Milan Mibtel: Italian shares ended weak but off lows, depressed by soggy trade on Wall Street and nervousness that Japan-US intervention is only a temporary solution for the beleaguered yen. The expiry of options on Friday also weighed on the market.

BCI turned lower in afternoon trade after holding up well at the start to end 1.08 per cent down at 10,460 lire.

ENI shares fell by 2.66 per cent to L11,490 after the government's announcement that it would retain a controlling stake in the group after the sale of a fourth tranche of shares.

Shares in electrical component maker Beghelli recovered earlier losses to end 0.11 per cent higher at L6,585 on its third day of trade.