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European markets opened lower Wednesday morning, playing catch-up with a large drop in U.S. markets Tuesday after the Fed dropped its target rate 0.25%, disappointing those who had hoped for a more robust 0.5% cut (full story I, II). Markets were near their highs at 6:00 a.m., as were U.S. index futures.

The FTSE 100 is off 0.94%. Troubled U.K. bank Northern Rock (OTC:NHRKF) fell another 6.4% after shedding 3.2% Tuesday. Banks were big losers, including Royal Bank of Scotland (RBS -4.3%) and Barclays (BCS -3.9%). Buyout target Rio Tinto (RTP) was down 3% while its courter BHP Billiton (NYSE:BHP) fell 2.6%. Rio said Wednesday it saw nothing new in BHP's recent comments that its offer remained 'compelling.' Xstrata, which gained 2.8% Tuesday on after it said it is open to talks with potential suitors, fell back 1.4%. BAE systems (OTCPK:BAESY +1%), Vodafone (VOD +0.2%) and Cadbury Schweppes (CSG +1.1%) were among early gainers.

The CAC 40 is down 1.23%. Renault (OTC:RNSDF -3.5%) and AXA (AXA -2.7%) were among losing constituents. Alcatel-Lucent (NYSE:ALU) shares were up 0.4%.

Germany's Dax is off a milder 0.48%. DaimlerChrysler (DAI) is down 2.4%, Infineon (IFX) is off 1.7% and Deutsche Bank (NYSE:DB) fell 1.6%. Bayer (OTCPK:BAYRY +1.7%) and BASF (OTCQX:BASFY +1%) were among gainers.

"Obviously down on the back of the Fed," said Leeds stockbroker David Scott. "It was the over optimists that were hoping for a half (point cut), but they've got problems on the inflationary front (and) can't go slashing rates outrageously."

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Source: Europe Stocks Near Highs, But Still Down After U.S. Selloff