Frankfurt DAX: The German Xetra DAX index which reflects electronic after-hours trading closed modestly higher after Wall Street pared its opening losses and the dollar firmed.

Concerns about the rioting in Indonesia and its impact on markets in the Asian region had dragged the market lower in earlier trading.

The profits warning by Hewlett Packard, which some expected to send Wall Street technology stocks spiralling downwards, failed to have that impact and the Frankfurt market also shrugged off the slightly stronger American inflation figures.

Paris CAC-40: French shares finished lower from Wednesday's record high, but were off their lowest levels of the day after tracking the Dow in the early part of the afternoon session. Interest rate concerns, riots in Indonesia and the early weakness on Wall Street weighed on the market, driving the CAC as low as 3979 before the recovery towards the end of the session.

Financial shares were hit by profit-taking while oils bucked the downward trend with Elf Aquitaine up almost 5 per cent as Merrill Lynch picked it as its stock of the week. Analysts expect the market to move back up towards 4275 on the CAC in the next couple of months on the back of good corporate news.

Milan Mibtel: Share prices in Milan closed weaker despite the Dow's recovery from early losses, amid nervousness ahead of the expiry of stock options today. Banca di Roma and BCI, however, were star performers as dealers became increasingly convinced that a merger between the two banks would be announced. Italian media reports suggested that a link-up between the two banks could be announced as early as next month.

Telecom Italia ended almost 2 per cent lower after comments by a government minister about a golden share sparked fresh uncertainties about the management of the privatised company.