MARKETS-EUROPE-STOCKSNEWS =2

08:57GMT 22May2008-Volkswagen down on oil price, MS comment

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Shares in Volkswagen (VOWG.DE: Quote, Profile, Research) fall 3.5 percent and are the strongest negative weight on a falling DJ Stoxx auto index , weighed by record oil prices CLc1 and by comments from Morgan Stanley on European carmakers.

Volkswagen shares also fall after a source familiar with the matter tells Reuters the German government has agreed a revised law that would maintain the state of Lower Saxony's blocking minority at the carmaker.

"The oil price and Morgan Stanley's comments alone are a burden. News about Lower Saxony adds to that," one trader says.

Morgan Stanley downgrades Volkswagen to "underweight" from "overweight" and cuts the price target to 141 euros from 165 euros.

Daimler (DAIGn.DE: Quote, Profile, Research) is down 1 percent, Renault (RENA.PA: Quote, Profile, Research) falls 0.4 percent and Fiat (FIA.MI: Quote, Profile, Research) declines 2.1 percent.

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Reuters Messaging rm://eva.kuehnen.reuters.com@reuters.net