US Markets - Wall Street suffered a sluggish day after two consecutive days of gains as the US Dollar hit a record low against the euro and amid a mixed set of brokerage results.

Attention was focused on Ben Bernanke, Federal Reserve chairman, and Hank Paulson, Treasury secretary, as they gave testimony before Congress on the subprime mortgage crisis.

The S&P?500 closed 0.7% lower at 1,518.74. The Nasdaq Composite was off 0.5% at 2,654.29, while the Dow Jones Industrial Average was down 0.4% at 13,766.70.

Appearing before the House financial services committee, Mr Bernanke said delinquencies and foreclosures in the subprime mortgage market “are likely to rise further”.

“Global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans,” Mr Bernanke said.

But Mr Paulson told the House that in spite of a recent reappraisal of risk and weaknesses in the housing sector, “the fundamentals point to continued US economic growth”.

He also said Fannie Mae and Freddie Mac, the government-chartered companies that own or guarantee about 40% of US mortgages, should temporarily be allowed to securitise loans exceeding $417,000 – so-called “jumbo” mortgages.

His comments failed to lift the S&P homebuilder index, which endured another torrid day, closing 6.3% lower at 453.53.

Transport stocks also showed weakness after a disappointing earnings forecast from FedEx.

In the three months to August 31, FedEx increased net income from $475m to $494m but said 2008 earnings would decline by as much as 4.3%. Shares in the company closed 2.9% lower at $104.45.

“Recent financial market volatility and high energy costs have increased the uncertainty surrounding the near-term economic outlook,’’ the company said in a statement.

The Dow transport index fell 1.8% and has fallen about 11% in the past two months.

Crude oil prices again climbed to record levels, closing $1.39 higher at $83.32, providing a further support to energy stocks.

Bear Stearns and Goldman Sachs completed the week’s round of brokerage earnings updates for the fiscal third quarter but achieved differing results.

Bear reported a 61% decline in earnings for the quarter from a year ago. Net income declined from $438m to $171m, while fixed-income revenue plummeted 88% to $118m.

Bear’s shares fell as low as $113.88 but the stock closed only 0.2% lower at $115.46.

In contrast, Goldman delivered a 79% rise in third-quarter profits to $2.85bn, compared with $1.55bn the previous year, beating expectations, as revenue rose 63% to $12.3bn.

Its shares have climbed almost 10% this week but yesterday afternoon slipped 1% to $203.53. The S&P investment bank index shed closed 2% lower

Elsewhere there was mixed news for the economy. Weekly jobless claims fell 9,000 to 311,000 and the four-week moving average fell 3,500 to 320,750.

The Philadelphia Federal Reserve Bank’s manufacturing index, a measure of regional factory activity, climbed to 10.9 in September, after a flat result the previous month.

However, the Conference Board’s index of leading economic indicators fell 0.6% in August, exceeding the 0.5% fall anticipated by analysts.

European Markets - European equity markets fell, giving back some of the previous session's gains, amid renewed concerns about the fallout from the credit crisis on the banking sector.

Let's start then in Germany where German stocks fell for the first time in three days, paced by Deutsche Bank AG, the country's biggest lender.

Bayerische Motoren Werke AG and Fresenius Medical Care AG also retreated. Metro AG rallied after the retailer said Chief Executive Officer Hans-Joachim Koerber will step down at the end of next month.

The DAX Index dropped 25.31, or 0.3%, to 7,725.53 at 2:11 p.m. in Frankfurt. DAX futures expiring in September slid 31, or 0.4%, to 7,725. The HDAX Index of the country's 110 biggest companies decreased 0.5%.

Deutsche Bank fell 2.90 Euros, or 3.1%, to 91.27. The bank will write down the value of leveraged loans and abandon hiring plans after making ``mistakes'' during the credit boom, Chief Executive Officer Josef Ackermann said in an interview with Germany's ZDF television.

JPMorgan Chase & Co. said the bank may have to take a 625 million-Euro ($877 million) charge in the third quarter.

BMW, the world's biggest luxury carmaker, fell 74 cents, or 1.7%, to 42.31 Euros. Fresenius Medical Care, the world's largest provider of kidney dialysis, decreased 47 cents, or 1.3%, to 36.81 Euros.

Metro, Germany's biggest retailer, rallied 4.60 Euros, or 7.3%, to 67.40, its steepest gain in more than four years.

Koerber asked the company to be relieved of his duties and will be suceeded by Eckhard Cordes, chairman of the supervisory board.

Air Berlin Plc advanced 22 cents, or 1.7%, to 13.20 Euros. Germany's biggest discount airline agreed to buy Condor Flugdienst GmbH from tour operator Thomas Cook Plc for as much as 475 million Euros to add routes and planes.

The all-stock deal will leave Thomas Cook, Europe's second- largest travel agency, with 29.99% of Air Berlin stock.

Balda AG lost 28 cents, or 4%, to 6.80 Euros. The world's second-largest maker of plastic casings for mobile phones said U.K.-based Sapinda International Ltd. cut its stake to 8.44% from over 10%.

Deutsche Boerse AG climbed 1.25 Euros, or 1.4%, to 88.08. UBS AG raised its price estimate for shares of the operator of the Frankfurt exchange to 95 Euros from 89.5.

Premiere AG rallied 1.14 Euros, or 7.5%, to 16.25. WestLB AG raised its recommendation for shares of Germany's biggest pay-television broadcaster to ``buy'' from ``add.''

To The Netherlands now where Shares closed lower in Amsterdam, tracking Wall Street amid jitters about the US economy, high oil prices and the slide of the Dollar vis-a-vis the Euro, while Corporate Express soared following M&A talk.

The AEX closed 1.09 points or 0.20% lower at 542.45, after trading in a range of 539.41-543.03.

Corporate Express gained 6.34% to 8.05 Eur, providing the story of the day amid reports that sparked M&A speculation. Some media reported that some of the group's shareholders want it broken up and sold, while other reports suggested that competitor Staples had already made a bid behind closed doors.

Among decliners was staffing company Vedior, which shed 0.99% to 16.05 Eur while peer Randstad dropped 0.92% to 38.74 Eur. Positive comments on the stocks were outweighed by worries among investors about the stability of the economy following continued credit crunch woes.

Reed Elsevier lost 0.15% to 13.50 Eur, ING edged 0.16% lower at 30.95 Eur, Akzo Nobel dropped 1.05% to 56.28, Philips shed 1.43% to 31.04 and Unilever lost 1.71% to 22.44 Eur.

TNT led decliners, shedding 2.38% to 29.55 Eur after market peer Fedex gave off a profit warning.

Among gainers was ABN Amro, adding 0.22% to 36.75 Eur. The bank held its EGM on the takeover bids by Barclays and the RBS consortium but as votes were not held, the EGM was seen as uneventful beforehand by investors.

Fortis rose 0.45% to 26.61 Eur, amid reports that Fortis will launch its 13  billion Eur share issue tomorrow, with new shares being priced at 15 Eur a piece.

SBM Offshore rose 1.35% to 27.84 Eur after a price target upgrade to 34 Eur from 30 at Morgan Stanley.

Among midcap shares, Univar added 0.17% to 53 Eur amid news that CVC has extended its tender offer period for Univar shares until October 4.

SNS Reaal added 1.42% to 15.69 Eur and Van der Moolen added 1.85% to 3.31 Eur.

Stork dropped 0.46% to 45.22 Eur aid news that unions have asked Marel to put out a takeover bid on all of Stork.

Vopak dropped 1.77% to 41.06 Eur, Aalberts shed 2.13% to 16.58 and ASMI led decliners, shedding 2.44% to 19.22 Eur.

To France now and Paris where Share prices closed lower, in line with US trading, as investors turned cautious again after a 2-day surge, with negative newsflow around financials and mixed US indicators weighing on sentiment.

The CAC-40 index finished down 42.06 points or 0.73% at 5,688.76. Among CAC-40 stocks, 7 closed higher, 32 closed lower and 1 was unchanged.

On the Matif, September CAC-40 futures were trading at 5,711.5.

On the broader indices, the SBF-80 index closed down 51.94 or 0.78% at 6,623.56 while the SBF-120 ended 30.79 or 0.74% lower at 4,131.12.

In today's session, financials all lost ground, pulled down by Northern Rock's continued woes and Deutsche Bank's admission that it made mistakes in the credit market crisis and expects its third-quarter results to be hit.

Credit Agricole fell 0.33 Eur or 1.18% to 27.57, BNP Paribas shed 0.86 or 1.10% to 77.14, Dexia slipped 0.15 or 0.69% to 21.51, while Societe Generale was down 0.49 or 0.40% at 120.82.

Among other fallers, Air France-KLM dropped 0.84 or 3.23% to 25.20 on renewed rumours of a possible tie-up with Alitalia.

Reports in the Italian press this morning claimed that Air France-KLM is proposing a share swap to combine the two companies.

EDF was the biggest faller at the close, down 0.48 or 3.34% at 71.77, as the utility saw profit-taking after acting as a defensive stock in recent sessions.

Pernod Ricard fell 4.22 or 2.71% to 151.55, as the overall market weakness offset the company's 24% rise in full-year net profit from ordinary activities, meeting its guidance for an increase above 20%.

The company said a decision to bid for Absolut vodka parent company V&S will depend on whether or not Pernod has concluded a deal with Russia's Stolichnaya before the Swedish sale process begins.

EADS dropped 0.35 or 1.70% to 20.25 amid concerns the slide in the Dollar will mean its Power8 restructuring targets are insufficient.

But the group said it will not change its plan for restructuring its Airbus unit unless the Euro stays above the 1.40 usd rate 'for a sustainable period'.

Among the few bluechip gainers, construction firm Vinci rose 00.59 or 1.12% to 53.19 following an upgrade from Morgan Stanley to 'overweight' from 'equal weight.'

Vivendi gained 0.15 or 0.50% to 30.24 after analysts at Merrill Lynch upgraded the shares to 'buy' from 'neutral.'

France Telecom, meanwhile, ended unchanged at 22.72. The group's CEO confirmed today a widely rumoured deal with Apple under which mobile phone operator Orange will exclusively sell the iPhone in France.

Off the CAC-40, Eramet surged 15.11 or 7.06% to 229.20 amid revived speculation that the Duval family is actively seeking the sale of its 37% stake in the nickel miner.

Haulotte Group added 1.16 or 4.32% to 28.03 after the aerial work platform maker revealed a 39.2% jump in first half net profit and announced that order intake to the end of August was up by more than 50%.

Into Belgium now where Shares in Brussels closed lower on a weak Wall Street opening amid mixed bank results, with Colruyt leading the blue-chips down.

At the close, the Bel 20 was down 30.05 points or 0.69% at 4,354.65.

Discount supermarket group Colruyt dropped 6.59 Eur or 4.15% to 152.28, after its rating was cut to 'hold' from 'accumulate' at Bank Degroof and 'neutral' from 'overweight' at JP Morgan after chairman Jef Colruyt's comments that the group 'will be unable to repeat last year's extraordinary growth' in 2007 and 2008.

The chairman said he expects the group to grow more slowly in 2007 and 2008, and forecasts full year sales of 274  million Eur, after 262.6  million in the previous financial year.

The outlook provided during the AGM confirms our expectation that growth is decelerating,' said Rabo Securities analyst Patrick Roquas in a note to clients.

He said that adverse weather conditions and competition with Lidl have slowed the rate of growth at the company.

Roquas added that the group's guidance is generally conservative, but nevertheless said he would cut his growth estimates.

He reiterated his 'hold' rating and 150 Eur target price.

Steel and wire cord manufacturer Bekaert fell 2.65 Eur or 2.79% to 92.29, while real estate group Cofinimmo was down 2.95 Eur or 2.29% to 125.92.

Elsewhere, national telecoms operator Belgacom was 0.65 Eur or 2.04% lower at 31.23. The group was upped to 'add' from 'neutral' at Dexia, following yesterday's announcement that the group has dropped out of the race for the second mobile phone licence in Qatar. Its rating was upgraded to 'neutral' from 'underperform' and target price raised to 34 Eur from 27 at Credit Suisse.

Meanwhile, utility Suez was down 0.57 Eur or 1.41% at 39.92.

Brewer InBev inched down 0.25 Eur or 0.39% to 64.43. The group denied rumours it plans to divest its German Diebels, Gilde and Loewenbraeu beer brands, saying that it continues to see them as an important part of its strategy.

The company said in a statement: 'InBev Germany has a successful and attractive portfolio on the German beer market.'

It added: 'The strong and well-known regional brands Gilde, Loewenbraeu and Diebels continue to belong to InBev's current strategy.'

The statement followed reports yesterday that employees at the breweries producing Diebels, Gilde and Loewenbraeu are worried that Inbev may decide to sell the breweries in order to focus on its core brands Beck's and Franziskaner.

Among the heavyweight financials, Dexia was down 0.18 Eur or 0.83% to 21.50, while KBC Group was 0.75 Eur or 0.77% lower at 96.23.

Peer Fortis bucked the trend, however, by edging up 0.13 Eur or 0.49% to 26.63.

Fortis said it would not comment on reports earlier this morning that the bank's rights issue is to be priced at 15 Eur per share.

'We do not comment on rumours,' a Fortis spokesperson said.

Earlier, newspaper The Daily Telegraph had written on its website that the Belgian-Dutch bank, which is vying to buy ABN Amro together with Royal Bank of Scotland and Santander, will from tomorrow issue the new shares at 15 Eur apiece.

Fortis has committed itself to raise about 13  billion Eur by issuing new shares to help fund the 24  billion Eur Fortis will have to pay for ABN Amro's retail banking, private banking and asset management businesses.

For the risers, Mobistar was up 0.45 Eur or 0.77% at 58.65, after it was upped to 'buy' from 'hold' at SG Securities.

Outside the Bel 20, venture capital group GIMV was down 0.31 Eur or 0.63% at 49.00 after the group said it invested 67.7  million Eur over the first quarter, which under its new reporting system now runs from April to June, while revenues from divestments reached 196.2  million Eur over the same period. It expects to be able to announce the start of its buy-out activities in France 'shortly'.

Biotechnology group OncoMethylome Sciences rose 0.38 Eur or 3.41% to 11.51, after ING increased its target price to 16.2 Eur from 13.3, arguing that this week's clinical data has strengthened confidence in the viability of the group's colorectal and bladder cancer diagnostics. The group's first half net loss widened to 5.1  million Eur from 3.4  million a year earlier.

Across to Austria now where in Vienna Shares closed lower led by profit-taking in banking stocks and oil giant OMV after several days of solid gains.

The ATX closed down 0.64% or 29.46 points at 4,592.54. The ATX Prime closed down 0.75% or 16.91 points at 2,230.58.

After rising by over 4% yesterday Raiffeisen International dropped 1.32% to 104.59 Eur as investors cashed in on gains.

Dealt in high volume, heavyweight Erste Bank closed down 0.29% at 55.34 Eur supported ahead of the bank's Investor Day meeting in Bratislava tomorrow. Market participants hope to hear more news about the bank's goals and possibly a share price catalyst.

Shares in OMV closed down 0.02% at 49.69 Eur on profit taking as investors locked in gains after the oil and gas major closed up nearly 7% yesterday following several positive broker comments this week.

Investors also took profit in industrial shares after two days of solid gains.

Shares in Andritz closed 2.01% lower at 46.70 Eur, Mayr-Melnhof Karton retreated 1.43% to 80.80 Eur, and heavyweight voestalpine fell 1.44% to 58.32 Eur albeit in weaker-than-usual volumes.

Also retreating on profit-taking, A-TEC Industries closed 1.89% lower at 129.99 Eur. Today, the holding company said a consortium comprising one of its units had won a substantial order to build a coal-fired plant in Germany.

Elsewhere, on the ATX Prime shares in Pankl Racing Systems closed broadly flat down 0.03% at 38.29 Eur, buoyed after analysts at Italian brokerage Kepler Equities initiated coverage with a 'buy' recommendation and set the target price at 55 Eur.

Shares in Immofinanz closed down 2.07% at 9 Eur as negative broker comments out of Germany on Austrian property stocks outweighed news of a first-time dividend of 0.33 Eur a share to be paid out after the property company reported strong growth in the first quarter this morning.

Low-cost airline SkyEurope closed 0.75% higher at 2.70 Eur after news its core shareholder York Global had boosted its holding to just under 30%.

Next door to Switzerland now and to Zurich where Swiss shares closed lower tracking Wall Street losses, with Nestle weighing heavily after the market reacted negatively to its surprise naming of Paul Bulcke as CEO designate, with most participants expecting chief financial officer Paul Polman to be put forward.

The Swiss Market Index closed 1.2%, or 110.04 points lower at 8,896.72 and the Swiss Performance Index was 1.2%, or 89.74 points down at 7,218.82.

The Euro was down at 1.6487 SFr and the Dollar lower at 1.1700 SFr.

Heavyweight Nestle closed 3.6%, or 19 SFr down at 510.00.

In the blue-chip banking sector, UBS fell 0.50 SFr to close at 63.90 and Credit Suisse came off earlier lows, easing 0.45 SFr to close at 79.20. Julius Baer retreated 1.8%, or 1.50 SFr to close at 82.45.

In the broader financial sector, Baloise fell 1%, or 1.2 SFr to close at 118.20. Earlier, the insurance group said it has launched operations in Serbia and set up a local unit. Zurich Financial dropped 3.25 SFr to 351.75 and Swiss Life was 2 SFr lower at 292.

Swiss Re lost 1.9%, or 2.00 SFr to 101.20.

In the engineering sector, ABB outperformed the market, losing a scant 0.04 SFr to close at 29.42. Earlier, the Swedish-Swiss engineering group said it had won a 33  million usd pulp mill contract in Brazil.

Elsewhere, pharmaceuticals heavyweight Roche fell 0.30 SFr to close at 210.20. Earlier Roche said that the EU had approved Tamiflu in the form of smaller capsules for children, and that it had tentative EU approval to reinstate HIV drug Viracept, which was pulled from the market in August, 2007.

Rival pharmaceuticals group Novartis closed 0.45 SFr lower at 65.40 SFr.

Outside the SMI, Panalpina plunged 16.50%, or 39.50 SFr to close at 200.00, after the Swiss logistics group said it expects some 30-50  million SFr to be shaved off its 2008 EBITDA following the suspension of certain services in Nigeria amid ongoing investigations into alleged corrupt practices.

Into Scandinavia now and starting in Denmark where Copenhagen shares closed lower on profit-taking after yesterday's rises, led down by financials, while FLSmidth rose on an order and DFDS was higher on possible acquisitions, brokers said.

The OMXC20 index closed 3.24 points lower at 491.44 and the OMXCB Benchmark index fell 2.29 points to 469.16.

The OMXC All Share index closed 2.67 points lower at 480.14 on turnover of 4.22  billion DKr.

Financial stocks fell again after rising yesterday on positive sentiment following an interest rate cut in the US, which was also seen as relieving pressure on lenders involved in the sub-prime sector, dealers said.

Jyske Bank closed 7.5 DKr lower at 398.5, Danske Bank fell 0.25 to 210.75, Sydbank shed 2.75 to 229.25, Topdanmark was down 12 at 864 and TrygVesta shed 3 to 415.5.

FLSmidth added 7 to 524. The group won an order worth 1.2  billion DKr from the Russian cement producer Eurocement Group to deliver machinery and equipment to a new cement production line in the Voronesh district, 600 kilometres southeast of Moscow.

The order will contribute positively to the group's earnings until the production line is commissioned during the first half of 2010.

DFDS was 3 higher at at 780. CEO Niels Smedegaard told daily Boersen that the group aims to grow through mergers or acquisitions and has a 3  billion DKr war chest.

Dealers said Stena, P&O Ferries and AP Moller-Maersk's Norfolkline are potential acquisition candidates.

DS Torm added 1.25 to 211.75 and DS Norden was up 4 at 530 on stronger bulk transport rates, dealers said. The Baltic Dry Index over bulk transport rates hit a new all-time high today, they added.

AP Moller-Maersk A fell 1,300 to 68,400 and the B-shares were 1,100 lower at 69,300.

Novo Nordisk B fell 3 to 636, hit by the general profit-taking.

The group was given EU approval for use of its insulin NovoRapid in elderly people, while a new study confirms that Novo's NovoMix 30 (biphasic insulin aspart), a modern pre-mixed insulin for treating diabetes mellitus, is associated with significantly fewer nocturnal and major hypoglycaemic events than biphasic human insulin (BHI).

Lundbeck shed 1.5 to 146 and Coloplast was 11.5 lower at 495.5.

Danisco fell 5.5 to 399 after rising yesterday following its first-quarter report.

Novozymes was down 3 at 649, while Carlsberg B was unchanged at 725.

William Demant Holding was unchanged at 469.5. UBS upgraded the stock to 'neutral' from 'sell', with a target of 495 DKr, on valuation grounds.

GN Store Nord shed 0.75 to 54.75, while Vestas Wind Systems ended the day 8 higher at 390.

Hopping across to neighbours Sweden  and to Stockholm where shares closed lower as Ericsson led the market south on profit taking after yesterday's stellar gains, but with OMX reversing earlier losses and gaining sharply on news that Qatar Investment Authority has taken a 10% stake in it.

The OMX Stockholm index closed down 1.19% at 387.61 points, while the OMX Stockholm 30 finished 1.10% at 1,208.34.

OMX closed up 7.69% at 259.00 SKr, having fallen by 13% in morning trade after Borse Dubai and Nasdaq announced a deal whereby the middle eastern exchange will become a big shareholder in the merged Nasdaq/OMX.

OMX AB's board said it has noted the joint announcement by The Nasdaq Stock Market Inc and Borse Dubai, and will assess the implications of the structure for shareholders and update OMX shareholders in due course.

This morning as part of a wider deal, Borse Dubai will follow through on its 230 SKr per share offer for a 25% stake in OMX, with Nasdaq then acquiring all of Borse Dubai's OMX shares. This leaves Nasdaq's lower offer for the remaining shares.

However the OMX shares soared back up in afternoon trade on news that Qatar Investment Authority has taken a 10% stake in OMX, prompting hopes of a bidding war between the government owned Middle East company and Nasdaq/Borse Dubai.

The rest of the market was overwhelmingly lower.

Ericsson took a serious hit with its B shares closing down 4.37% at 25.82 SKr on profit taking after gains of 10% since its recent capital markets day in London.

Engineers closed modestly lower across the board, with Sandvik finishing down 0.89% at 139.50, and Atlas Copco A down 0.22% at 114.25.

SSAB A bucked the market, gaining 2.04% to close at 250.00 on continued positive momentum after Credit Suisse raised its target price on the stock to 300 SKr from 272 yesterday.

Husqvarna B closed down 0.30% at 83.75. Carnegie said there was no breaking news at its capital markets day yesterday, but the company was fairly confident about its US consumer business.

'Demand for 2008 will still be sluggish (flat to slightly down, we interpret), with opportunities to outperform through share gains, but perhaps not to the same extent as in 2007,' Carnegie said in a comment.

The banks closed slightly lower in the main but with Swedbank A managing to hold on to its gains of yesterday, closing unchanged at 219.50 after Goldman Sachs upgraded the stock to 'Buy' from 'Neutral' whilst downgrading Handelsbanken to 'Sell' from 'Neutral' in a Swedish bank sector review.

Svenska Handelsbanken A closed down 1.50% at 197.00.

Among other shares traded, SCA B closing down 2.24% at 119.75, Volvo B up 0.21% at 117.75, Scania B down 1.55% at 159.00, Hennes & Mauritz B up 1.67% at 395.50, and Boliden down 2.34% at 135.50.

Now to Finland where Helsinki Shares closed lower, led by Neste Oil and other selected blue chips, with Outokumpu gaining sharply after an investor meeting in Italy today boosted optimism.

The OMX Helsinki 25 ended 0.72% lower at 3,223.11 and the OMX Helsinki 0.75% lower at 12,014.95. Volume was 1.47  billion Eur.

The leaderboard finished mixed, with Neste Oil --down 3.59% at 25.21 Eur-- Stora Enso --down 1.95% at 13.04 Eur-- and M-real --3.84% lower at 3.76 Eur-- among the biggest fallers.

Nokia also fell, losing 0.83% to 26.23 Eur, following strong gains of late.

Outokumpu outperformed, climbing some 3.57% to 23.20 Eur. In Milan this afternoon, the company discussed trends in the stainless steel market and its plans -- unveiled earlier this week -- to strengthen in special grade stainless steel.

In telecoms, TeliaSonera ended up 0.16% at 6.09 Eur. The company is to invest more than 110  million Eur in expanding the GSM network of Coscom, the Uzbek mobile operator that it controls through MCT Corp, the website of Kauppalehti reported, citing the head of Coscom.

Elsewhere, Rautaruukki added 1.40% to 42.08 Eur, Sampo fell 2.74% to 20.21 Eur and Fortum rose 0.33% to 24.52 Eur.

Fortum said it paid 243  million Eur in a share issue by Russian Territorial Generating Company 1 (TGC-1) to maintain a blocking stake of just over 25% in the power utility.

Fiskars added 1.00% to 13.13 Eur after saying it expects this year's net sales to grow by about 20% compared to 2006, and for EBIT to 'further increase'.

Finally in the Nordic arena to Norway where Oslo shares closed lower on profit-taking after yesterday's rises, and led down by Telenor after a broker cut its target price for the stock, while Acergy and Subsea 7 rose on positive broker comments.

The OSEBX Benchmark index closed 1.75 points lower at 492.34 and the OSEAX All Share index shed 1.72 points to 570.92.

Total turnover amounted to 14.72  billion NKr.

Telenor closed 3.75 NKr lower at 109. UBS cut its target price on the stock to 122 NKr from 130 NKr previously and repeated its 'neutral' rating, while ratings agency Fitch reissued a negative outlook on its debt.

Tandberg shed 1.5 to 130.25. Carnegie reiterated its 'outperform' on Tandberg with a target price of 150 NKr.

Acergy was up 5.25 at 167.75 and Subsea 7 rose 4 to 154. Credit Suisse initiated coverage of Acergy and Subsea 7 with 'outperform' ratings with respective target prices of 187 NKr and 185 NKr.

The broker said Acergy and Subsea 7 are among the sector's purest plays on the high-growth subsea field development market and said this niche offers above-average margins and above-average returns.

In addition, Morgan Stanley lifted its target price for Acergy by about 10% to 220 NKr, and repeated its 'overweight' stance and 34 Eur target on Subsea in a bullish oil services note.

Statoil added 1.25 to 190.75, with investors shrugging off a broker downgrade. Jyske Bank cut its stance on the stock to are duce' from 'accumulate' following share price rises driven by higher oil prices.

Norsk Hydro fell 1.25 to 236.25.

Eidesvik Offshore was 0.75 lower 57.5 as Carnegie repeated its 'underperform' rating on the group and highlighted the problems it has containing costs, dealers said.

Adding there is downside potential for the share price, Carnegie noted that, based on 2008 EBITDA earnings projections, the stock is trading at a 70% premium to peers

Golden Ocean added 0.1 to 33.9. The Baltic Dry Index over bulk transport rates has hit a new all-time high, dealers said.

Prosafe fell 1.4 to 90 and Petroleum Geo-Services was 2 lower at 150, while Seadrill rose 1.5 to 118.75.

Aker Kvaerner rose 1.5 to 166.5. The group won a 2  billion NKr contract from BP for further work on the Skarv field development in the Norwegian Sea.

Aker Yards shed 0.25 to 65.75.

Norgani Hotels was 0.25 lower at 93.75 and Norwegian Property fell 1 to 64.5. ING Bank says it has 2.87  million shares in Norgani Hotels, 7.26% of the issued shares. Norgani is currently the subject of a takeover battle between Norwegian Property and UK-based Aberdeen Property Investors.

Among other stocks traded today, Norske Skog was down 0.5 at 63, Yara International shed 1 to 153, Storebrand was 1.1 lower at 84.7, DnB NOR fell 0.2 to 80.6, Orkla was 0.2 lower at 92.9 and Renewable Energy Corporation was down 1.75 at 227.25, while Hafslund B added 2 to 136.

Down South and to Spain now and Madrid where Share prices closed lower after yesterday's surge, and after a warning from Federal Reserve chairman Ben Bernanke that the US subprime mortgage market is in for further trouble, with banks and builders once again under pressure, but BME outperformed.

The IBEX-35 index ended down 67.70 points or 0.47% at 14,427, after trading in the 14,342-14,458 range.

Banks gave up some of yesterday's gains, with Santander dropping 0.05 Eur to 13.40, BBVA down 0.18 at 16.67, Banesto falling 0.29 or 2.17 to 13.06, and Popular shedding 0.22 to 12.17.

Constructors also lost much of yesterday's momentum, Sacyr Vallehermoso heading losses to drop 0.54 or 2.21% to 23.92, FCC down 0.20 at 57.75, and OHL losing 0.73 or 2.84% to 24.97.

Ferrovial lost 1.25 or 2.09% to 58.50. Earlier, the builder's financial director said the group is have ry advanced' in restructuring its BAA unit's debt, but did not specify a timetable for the securitisation, seen as a key catalyst for the builder's stock price.

BME led the gainers to rise 1.32 or 3.41% to 40.00 amid sector M&A news surrounding OMX, Nasdaq and Borse Dubai.

Sogecable outperformed, putting on 1.17 to 25.03 after AVS called a board meeting for Sept 27 to discuss football rights battle.

Also among the session's gainers, Enagas added 0.26 to 18.10, after Portugal's Jornal de Negocios cited REN CEO Jose Penedos as saying that a deal with the Spanish utility over an expected strategic alliances could be closed shortly, with the acquisition of cross shareholding in the two companies seen taking place next year.

Gamesa also rose 0.16 to 29.07, after a report in Cinco Dias cited the company's chairman as saying its order book to 2009 currently stands at 4,500 megawatts.

REE slipped 0.06 to 35.39, after Citigroup placed 1.35% for 34.95 Eur/shr on behalf of Endesa and Endesa announced it had sold a total of 2% REE for an average price of 35.33 Eur per share.

Amid small and medium caps, Zeltia surged 0.36 or 4.80% to 7.86, after it announced that the European Commission had cleared it to commercialise its Yondelis drug for the treatment of soft tissue sarcoma (STS) in Europe.

Avanzit shot up 0.43 or 11.23% to 4.26 on expectations of positive news flow tomorrow at the company's 1 pm press conference.

In Italy , more specifically Milan, Share prices closed lower on renewed worries over bank sector subprime worries, led by Finmeccanica after Goldman Sachs reiterated its 'sell' rating on the defence and aerospace company.

The Mibtel index fell 0.67% to 30,962 points and the S&P/Mib was off 0.78% at 39,980.

Volume traded was an estimated 5.018  billion Eur.

Brokers said the Deutsche Bank comments this morning on its exposure to credit market problems surprised the market, with analysts scrambling to work out the extent of the bank's problems.

One broker said it is likely there will be further subprime problems emerging in the next days and weeks to depress shares.

Another broker said today's fall was 'healthy' after the 4% rise over the last two days, including ahead of the FOMC decision Tuesday evening to cut US interest rates by 50 basis points.

Finmeccanica lost 3.80% to 19.98 Eur, continuing to react to a mixed bag of broker notes issued after an analysts meeting last week.

Credit Suisse said it maintains its 'outperform' on Finmeccanica, with a target price of 28.00 Eur, citing a strong order book.

Constructors fell again on housing market and high oil price concerns with Italcementi down 2.10% to 15.97 and Buzzi Unicem off 1.09% to 18.77.

Parmalat was on the negative side, down 1.95% to 2.52, with fundamentals, rather than prospects for legal claims, becoming more of a factor.

Luxottica lost 2.55% to 24.85, depressed by a Merrill Lynch downgrade to 'neutral', from 'buy'. Bulgari was down 1.61% to 10.74.

In the banking sector, BPM fell 1.95% to 10.18. The share is reacting to speculation of a merger with Unipol, up 0.21% to 2.42.

Unicredito lost 1.93% to 6.045. Sanford Bernstein started coverage with an 'outperform' rating and a 7 Eur target.

And finally to Greece where in Athens Shares ended flat, consolidating recent sharp gains and after trading in a narrow range, as advances for EFG Eurobank and Cosmote were offset by losses for Coca-Cola HBC.

The ASE general index closed flat at 4,972.3, again finding resistance at the psychological 5,000 index point level, and blue chips also closed little changed at 2,647.9.

Mid caps ended up 0.4% at 6,403.1, and small caps closed 0.3% higher at 1,070.7.

Advancers outnumbered decliners, 128 to 114, with 86 unchanged in below average volume of about 340  million Eur

EFG Eurobank finished up 1.9% to 25 Eur on widespread expectations that Michael Colakides, who recently resigned as vice chairman of Bank of Piraeus, will be taking up a senior position in the bank.

Cosmote rose 1.8% to close at 23.54 Eur after underperforming the market's sharp gains yesterday.

Bottler Coca-Cola HBC dipped 4.3% to end at 36.36 Eur on profit-taking, having just recently climbed to 38 Eur.

National Bank of Greece (NBG) closed down 1.5% to 44.34 Eur as investors decided to cash in on some of their recent gains. In other news on NBG, there were unconfirmed press reports that it will be opening a further 10 branches in Egypt and is interested in acquiring Banque De Caire.

Luxury goods retailer Folli Follie ended up 1.1% at 29.7 Eur after it said it had launched its first store in the Russian market in Moscow, in collaboration with a leading international luxury goods distributor.

Consumer and mass cosmetics wholesaler Sarantis closed 1.1% higher to 11.12 Eur after it said it had signed a 5-year distribution agreement with Evyap for Turkey.

Marfin Popular Bank closed 0.2% lower at 9.64 Eur after it said it had cut its stake in Bank of Cyprus to 6.6%.
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The Greek stock exchange faces being demoted to emerging markets status within the next 18 months by FTSE Group, the global index provider, because of the restrictions the exchange places on international investors.

It would be the first time a European Union stock market had been demoted from developed to emerging market status.

The news came as part of FTSE's annual review of the classification of countries into developed and emerging market categories, published today.

FTSE has set up a working party with the Athens Exchange and Greek Capital Markets Commission to look for solutions to the contentious issues.

These include restrictions on short selling and stock lending, allowing off-exchange transactions, making omnibus custody account facilities available to international investors, and delivery free of payment allowed for transferring securities between accounts.

UK Market - UK blue chips closed lower as Wall Street remained weaker with the banking sector heavily hit, as Northern Rock dropped sharply, and HBOS moved lower on rumours it has approached the Bank of England about funding.

By close, the FTSE 100 index was 31 points lower at 6,429, although off the intraday low of 64.9 points down at 9.29 am. The FTSE 250 was 122.5 lower at 11,013.8.

After rallying yesterday we are seeing minor profit taking today as investors wait and watch the dust settle. The main news is Northern Rock as it seems bizarre the government will not guarantee any new deposits placed in the bank. This has just added to the uncertainty in the market.

Northern Rock remained the biggest FTSE 100 loser, down 71.8 pence, or 27.94 pct, to 185.2, as sentiment surrounding the company took another turn for the worse as Treasury guarantees for depositors turned out to be less generous than hoped. The guarantees do not cover, for example, newly-opened accounts.

Rumours yesterday, although dismissed by the bank, suggested that any takeover bid for Northern Rock would be pitched at a deeply discounted level and investors were simply running for cover, traders said.

Citigroup cut its target price for Northern Rock from 400 pence to 150 pence, with a worst-case scenario of 6 pence a share, and reiterated its 'sell' stance.

Peer Alliance & Leicester once again suffered in sympathy with Northern Rock, down 60 pence at 755-1/2, having rallied sharply yesterday.

Meanwhile, HBOS was 37 pence lower at 837, amid rumours it had approached the Bank of England about the availability of funds for its mortgages. A spokesman for the bank denied this, and this helped the shares bounce from an earlier low of 809.

Royal Bank of Scotland fell back 17 at 521 and Standard Chartered shed 38 at 1,587.

In the midcaps Bradford & Bingley remained one of the biggest FTSE 250 losers, down 28-1/4 pence at 299-3/4.

Elsewhere, housebuilders also reversed yesterday's rally after a cautious note on the sector today from Citigroup.

The broker said it still sees reasonable upside from UK housebuilders in the medium term, but added that it expects no price inflation in 2008 and has cut its current-year earnings estimates across the board.

Citigroup said it now expects zero house price inflation in 2008, as opposed to the 3 pct previously expected, but has left its inflation assumption for 2007 unchanged at 3 pct.

The broker downgraded blue chip Barratt Developments and soon-to-be-FTSE 100 stock Taylor Wimpey to 'hold' from 'buy', but upgraded mid caps Berkeley Group and Bovis Homes to 'buy' from 'hold', saying their shares have fallen too far.

In reaction, Barratt shares shed 30 pence at 792, while its blue chip peer Persimmon lost 50 pence at 939. Among the mid caps, Taylor Wimpey dropped 15 pence at 290, Bellway shed 37 pence at 1,034, and Redrow was 21-3/4 weaker at 421.

Meanwhile, retailer Kingfisher gave back opening gains and was 11.3 pence lower at 181 as a cautious outlook statement offset better-than-expected first-half results.

Europe's largest home improvement retailer has reported a first-half profit before tax and exceptional items of 189.6 mln stg, compared with the consensus forecast of 183 mln stg, up from 178.5 mln stg a year earlier.

This was achieved on the back of a 9.8 pct increase in retail sales to 4.78 bln stg, with like-for-like sales up 4.3 pct.

However, Kingfisher chief executive Gerry Murphy said the UK market remains are latively weak'.

'We expect the second half to be tough as recent interest rate rises and current uncertainty in financial markets affect customer behaviour,' he said.

The cautious outlook also had an impact on peer Home Retail Group, owner of DIY retailer Homebase, with its shares down 21-1/4 pence at 373-3/4.

And ahead of FY results on Monday Wolseley was off 28 at 866-1/2 with analysts seeing the the group's pretax profit down on US woes.

Turning to the upside, cruises operator Carnival was the top FTSE riser up 157 or 7.08 pct at 2,374 after the group announced Q3 results were better than expected on stronger pricing.

Carnival reported an 11.8 pct rise in third-quarter net profit buoyed by a similar rise in revenues and raised its remaining share repurchase authorisation to 1 bln usd from 578 mln.

Elsewhere, further developments in the Friends Provident merger saga pushed the shares up 7.1 pence to 174.7, with rumours that Zurich Financial Services is to make a bid for the group.

Friends has already announced an agreed merger with Resolution, but the issue is far from settled.

Resolution has confirmed that it has been approached by both UK insurer Standard Life and specialist insurance rival Pearl Assurance, but has not received an offer or proposal from either party.

Standard Life was 3 pence lower at 274. Resolution was 0-1/2 higher at 684.

And, there was a better performance on the high street from food retailer Sainsbury, up 15-1/2 pence at 569-1/2, aided by news the company has opened its books to potential Qatari-backed bidder Delta 2.

Mining stocks were also in demand following higher prices.

Anglo American gained 53 at 3,182, Xstrata was up 35 at 3,085, and Kazakhmys was 27 higher at 1,450.

On the second line, London Stock Exchange was the top FTSE 250 riser, up 234, or 16.1 pct, at 1,687 after US stock market operator Nasdaq said it has sold 28 pct of the company to Borse Dubai as part of a wider deal, which will see the two exchanges become joint owners of Nordic counterpart OMX. Nasdaq retains a stake of 3 pct.

In a statement, Nasdaq said it sold its LSE stake at 14.14 stg per share, up from the average 11 stg per share it paid when acquiring the holding.

Later this morning, the state-backed Qatari Investment Authority said it had bought a 20 pct stake in the LSE, adding that it has no plans to launch a takeover bid for the group.

Construction and support services company Alfred McAlpine was 6-1/4 stronger at 493-1/4, amid rumours that Carillion, down 9-1/2 at 385-1/2, was about to make a 550 pence-a-share bid.

But on the downside, a disappointing trading update saw nightclubs and bars operator Luminar become the top faller, dropping 66-1/2 to pence to 633.

Luminar said its overall like-for-like sales were up 4.1 pct in the first half, as it reported a 'satisfactory' trading performance to end-August.

In reaction, Altium said that, given the circumstances, it expects to reduce its current year pretax profit estimates by about 4 pct or 1.5 mln, which it said is clearly a little disappointing.

Premier Oil shares were 19 pence lower at 1,069-3/4, after it posted weaker first-half profits, hit by increased exploration costs, prompting KBC Peel Hunt to downgrade the stock to 'sell' from 'hold'.

The company said pretax profit in the half-year to June fell to 68.5 mln usd from 90.3 mln, after exploration costs increased to 26.5 mln usd from 7.0 mln previously, offsetting a rise in revenue to 239.4 mln usd from 196.2 mln.

Dairy Crest was 35 pence lower at 685 after the Office of Fair Trading said it had provisionally found that large supermarkets and dairy processors have colluded to increase the prices of dairy products which led to an estimated cost to consumers of 270 mln stg.

The OFT statement inquiry helped to pull down Morrison, down 6-1/4 at 271-1/2, having been a major FTSE 100 riser earlier.

And finally, Stagecoach was 14 lower at 225-1/2 after Dresdner Kleinwort cut its rating on the transport group to 'hold' from 'buy' with an unchanged target price of 244 pence.

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Mervyn King will be forced to mount a public defence of his reputation as Bank of England governor after being driven into a striking policy U-turn on Wednesday in a bid to ease pressure on the UK banking system.

Can Mr King survive this extraordinary U-turn or has his position become untenable?

The Bank’s change of heart came after a series of high-level meetings on Tuesday involving the Financial Services Authority, the Treasury and some of the City’s largest institutions, where concerns were aired that the crisis at Northern Rock could spread to other smaller lenders, such as Alliance & Leicester and Bradford & Bingley.

Mr King will face an interrogation by MPs on Thursday over his stewardship of the financial system and his role in the recent run on the Northern Rock bank.

In an attempt to inject more liquidity into the system, the Bank has offered to lend tens of billions of pounds on three-month terms to cash-strapped banks that provide mortgages, starting with an initial injection of £10bn (€14.3bn) next week.

The move by the Bank, which had stood out among global central banks for taking a “tough love” line, came less than a week after Mr King warned that such actions could sow “the seeds of a future financial crisis”.

According to people who attended Tuesday’s meetings, Hector Sants, the FSA’s chief executive, urged the banks to lend to each other in the inter-bank market to prevent other smaller banks having to face a similar fate to Northern Rock. Regulatory officials were keen to stress that no other banks were facing imminent problems.

But Mr King stands accused of helping Northern Rock founder by acting tough with UK banks, only to step in later with emergency funding and finally agreeing to the action that bankers believe would have been enough to have headed off the debacle before it hit the high street.

Senior banking executives believe the recent crisis has also shown the frailty of financial regulation, where responsibility is split between the Bank, the FSA and the Treasury.

The Bank is expecting heavy criticism at Thursday’s hearing of the House of Commons Treasury select committee. But it insists the latest move was necessary because the situation had changed and action was needed “to alleviate the strains in longer-maturity money markets”.

The move is a significant change in direction for the Bank. Senior officials have been sceptical over the past month about whether similar action from the European Central Bank and the US Federal Reserve was effective. Until now, the Bank had only lent money at penalty rates overnight and only for high-quality collateral such as gilts.

The Bank and the Treasury insist the decision to change policy was not made under instructions from the Treasury.

Although the new policy is bound to raise questions about whether Mr King’s term will be renewed next year, the Treasury said on Wednesday night: “The governor has our absolute support.”

Japan & Asia Pacific - Most Asian markets closed higher on Thursday following a rally on Wall Street in the wake of the Fed's decision to cut interest rates and an increase in commodity prices.

In Japan The Nikkei 225 Stock Average closed up 0.2 pct at 16,413.79 as investors turned cautious ahead of testimonies by US Federal Reserve chairman Ben Bernanke and Treasury Secretary Hank Paulson on subprime mortgages before the US House Financial Services Committee.

The TOPIX index slipped 0.1 pct to 1,566.84.

Auto stocks were mixed. Honda and Toyota Motor declined, while the rest advanced. Inpex Holdings slipped 2.46% on profit taking, while Nippon Oil edged up 0.47%. Financial stocks came under renewed selling pressure, with Daiwa Securities Group, Credit Saison and Mitsubishi UFJ posting sharp declines.

Other decliners included Chubu Electric Power, Advantest, Fujitsu, NTT Data and Tokyo Electron.

However, steel and mining stocks found significant buying interest. Denki Kagaku, Hitachi Zosen, Kawasaki Kisen, Marubeni, Sojitz and Mitsui Sumitomo also saw some strength.

In South Korea The KOSPI index closed up 0.3 pct at 1,908.97 as investors reacted calmly to the decision by global index provider FTSE not to promote Seoul to developed market status and focused on better third-quarter corporate earnings.

Hong Kong 's Hang Seng Index held above the unchanged line throughout Thursday's session before closing up 146.49 points or 0.57% at another closing record of 25,701.

Conglomerate Hutchison climbed 2.75%. China Mercantile Holding, Citic Pacific, Cathay Air Pacific, Sinopec, Esprit Holdings, Li & Fung, CCB, China Mobile, ICBC, Bank of China and Bank of China Hong Kong rose solidly.

On the other hand, property stocks, China Unicom, CNOOC, Yue Yuen Industries, FIH and CKI Holdings retreated.

In China The benchmark Shanghai Composite Index closed up 1.4 pct at a record on strong gains in large cap financials and airlines.

The Shanghai A-share Index rose 1.4 pct to 5,741.54 and the Shenzhen A-share Index was up 1.1 pct at 1,580.90.

The Shanghai B-share Index rose 0.2 pct to 360.18 and the Shenzhen B-share Index was up 0.4 pct at 779.46.

In the Philippines Manila's composite index rose 2.4 pct to 3,442.38, with the index hitting a seven-week high following an extended celebration on Wall Street after the US Federal Reserve's larger-than-expected rate cut.

The broader all-share index rose 1.9 pct to 2,156.39.

Taiwan 's weighted index closed up 0.6 pct at 8,983.03 as pre-holiday caution put a lid on the early rally.

Australia 's All Ordinaries opened unchanged and rose steeply in early trading. Although the index gave back much of its gains by the mid-session, subsequently it rose again. Nonetheless, the index ended off the highs of the session. At the close of trading, the index was up 38.90 points or 0.61% at 6,401.

Energy and material stocks fueled the day's advances, while healthcare, IT and utility stocks receded. In the mining space, Alumina ended unchanged, and BHP Billiton, Rio Tinto, Newcrest Mining and Zinifex rose. Among banks, ANZ, Westpac and National Australia Bank fell, while Macquarie Bank gained. Media stocks News Corp. and PBL moved to the upside.

India 's Sensex traded above the unchanged line for the bulk of session, barring stray moments of weakness. The index ended the session up 23.39 points or 0.14% at 16,323. Realty, auto, metal and oil & gas stocks rose strongly, while IT and technology stocks declined sharply after the Indian rupee breached the Rs. 40 barrier against the dollar.

Among the other markets in the region, the Indonesian Jakarta Composite Index eased 0.38%, but the Malaysian KLSE Index gained 1.55%. New Zealand 's NZ50 Index was up 0.70% compared to a 1.17% decline by the Singaporean Straits Times Index.

Commodities - Crude oil prices jumped above $84 a barrel late on Thursday after production platforms in the Gulf of Mexico were shut down ahead of a threatened tropical storm.

Nymex October West Texas Intermediate hit a record $84.10 a barrel, up $2.17, but settled at $83.32, up $1.39 on the day. The October contract expired at the end of trading. The most active November WTI contract was up $1.05 at $80.75.

ICE November Brent closed 62 cents higher at $79.09 after peaking at an all-time high of $79.23.

Oil companies such as BP and Shell closed about 360,000 barrels a day of production or 27 per cent of the total in the Gulf of Mexico.

Agricultural commodities rose as Russia confirmed plans to curtail cereal exports and China said that it would encourage grain imports to cool down domestic food inflation. Wheat prices climbed after Russia said that it planned to levy an export tariff of 10 per cent on foreign wheat sales if prices continued to rise.

German Gref, Russian economics minister, said that details of the move would be announced next week. He added “there will be an intervention if prices exceed a certain range. In this case, there will be an export tariff of 10 per cent”.

At the Chicago Board of Trade, December wheat rose 13 cents to $8.58 a bushel. CBOT wheat last week reached a record high of $9.11¼ a bushel. In Paris, Euronext Liffe January milling wheat rose €3 to $255 a tonne.

Cereals traders said the Russian measure would reduce Moscow cereals sales. It is unclear if a 10 per cent tariff will be enough to curtail exports significantly. Russia is the world’s fifth-largest wheat producer and exporter, according to Deutsche Bank.

Any reduction in Russian supplies would increase demand for US wheat. US wheat exports are already 114 per cent above the 2006-07 marketing year’s level, according to data from the US Department of Agriculture.

Moscow is trying to keep its domestic market well supplied to put a lid on food inflation ahead of legislative elections in December, traders said.

CBOT December corn rose 15 cent to $3.73¼ a bushel, the highest price since late June. China said it would encourage imports of corn as rising food prices pushed inflation in August to an 11-year high of 6.5 per cent.

“A proper amount of imports will be encouraged to meet domestic demand,” said the Chinese National Development and Reform Commission, the country’s main planning body, in guidelines for the corn industry.

The CBOT December soyabean contract surged to a three-year high of $9.96¾ a bushel after reports that China would cut import tariffs from 3 per cent to 1 per cent to attract more supplies and cool food prices. It later traded 20 cents higher to $9.91 a bushel.

Rising agriculture commodities prices come on top of record freight costs.

The Baltic Dry Index, a gauge of shipping costs for dry bulk commodities such as grain, iron ore and coal, hit an all-time high of 8,619 points, up 2.25 per cent on the day. The index has set records since July on strong demand from emerging countries, port congestion in Australia and Brazil, and longer trade routes.

Base metals were mixed after strong gains on Thursday. In late trading on the London Metal Exchange, copper, the industrial metals’ bellwether, rose 0.1 per cent to $7,890 a tonne while aluminium lost 1.7 per cent to $2,443 a tonne.

Gold struck an intra-day high of 738.15 usd, the highest level since January 1980 when it hit 850 US Dollars.

Gold was trading at 737.25 US Dollars per ounce against 721.50 US Dollars in late New York trade Wednesday.

Currencies - The Canadian Dollar rose to parity against the US Dollar for the first time since 1976 on Thursday, buoyed by soaring oil prices and broad-based weakness in the greenback.

Late in New York, the Canadian Dollar rose 1.4 per cent to C$1.0012 against its US counterpart.

Elsewhere, the Dollar dropped to a record low through the $1.40 level against the Euro as the US currency continued its slide following the Federal Reserve’s decision to cut interest rates this week.

Traders said the Euro’s rise through the psychologically important $1.40 level – seen as a pain barrier for Eurozone exporters – triggered a host of stop-loss buying, sending the single currency higher.

The Euro rose 0.8 per cent to $1.4071 against the Dollar and rose 0.4 per cent to £0.7002 against the pound – having hit £0.7011, its highest level since January 2005 earlier in the session.

The Dollar fell 0.4 per cent to $2.0093 against the pound, lost 1.5 per cent against the yen to Y114.44 and dropped 1 per cent to SFr1.1717 against the Swiss franc.

Some analysts put the Dollar’s weakness down to speculation that Saudi Arabia was set to abandon its peg against the US Dollar.

The talk was started after the Saudi Arabian Monetary Authority announced that it was not going to follow the Fed and cut interest rates in spite of the Saudi riyal’s link to the Dollar.

Elsewhere, the South African Rand eased slightly off earlier levels versus major currencies in noon trade on Thursday, but the local unit was stable as the gold price continued to soar.

The Rand eased 0.5 percent against the Dollar, and was bid at 7.0746 from its overnight close of 7.0410.

China - China is to enforce a freeze on all government-controlled prices in a sign of Beijing's alarm about rising popular anger over inflation, now at its highest rate in more than a decade.

The order freezes a vast array of prices still under the control of government in China, ranging from oil, electricity and water to the cost of parking and park entrance fees.

The order, issued jointly by six ministries on Wednesday, comes after a vaguely worded announcement on the need to prevent price rises by the State Council, or cabinet.

"Any unauthorised price rises are strictly forbidden?.?.?.?and in principle there will be no new price-raising measures this year,” the ministries said. Events since the initial State Council announcement that inflation in August hit an 11-year high of 6.5 per cent appear to have galvanised the bureaucracy into a tougher stance.

Rising inflation is sensitive in the run-up to the five-yearly meeting of the Communist party, which is due to open on October 15 in Beijing and will choose the senior leadership until 2012. The sharp spike in inflation is largely due to higher food prices due to a shortage of pigs after a disease killed millions and the rising cost of feed – a global phenomenon.

But Chinese leaders and economists are increasingly worried that the impact of inflation and the subsequent government policy response, could cause severe problems for the economy.

Though they were once solely a domestic concern, Chinese prices are now an international issue because of the possibility of the higher cost of consumer goods produced in China fuelling inflation in large export markets such as the US and Europe.

Beijing has raised borrowing costs five times this year, both to cool lending and to prevent negative real interest rates, which provide an extra incentive for people to take money out of banks to buy shares.

China has raised the one-year deposit rate to 3.87 per cent, which is about equal to the eight-month average for inflation but well below August's 6.5 per cent.

The price freeze is the kind of administrative measure redolent of China's former planned economy but it may be less effective in China today, economists said.

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Shenhua, China's largest coal company, is studying acquisitions in Indonesia and Australia with a view to using mines in both countries to supply the southern Chinese market.

Chen Biting, chairman of the Shenhua group, said the increasing cost of transporting coal from China's own resources heartland in the north-west of the country made offshore mines potentially competitive.

"If we transport from the west to the east and then to the south, the distance will be a little bit longer than that from Indonesia to Guangdong (southern China) and the profit would not be so good,” Mr Chen told the Financial Times.

Shenhua has grown rapidly since its establishment 12 years ago because of explosive growth in coal demand in China. It has diversified into an integrated rail, port and power business.

The company has been quoted in Hong Kong since 2005 and has received final regulatory permission to raise $9.1bn on the Shanghai stock exchange. The shares rose HK$2.65, or 6.7 percent, to close at HK$42.15 yesterday .

Shenhua has 54 mines and annual capacity of about 200m tonnes, just under 10 per cent of China's total output. It is also investing heavily in coal-to-liquids and coal-to-chemicals projects but Mr Chen conceded tight water supplies in the north, where coal is abundant, could constrain these projects.

Government policy changes in recent years, imposing taxes on land use and the environment, and the introduction of a bidding system to secure resources have made coal a more expensive business. Other policy changes – especially the crackdown on smaller, mainly private mines, considered to have a worse safety record – have shifted the landscape in favour of large players such as Shenhua.

"Operations are getting more difficult and production costs are getting higher but the benchmark for entering the industry is rising as well. People cannot just enter it freely,” Mr Chen said.

Higher coal prices and transport costs helped China become a net coal importer in the first six months of this year for the first time.