Panizzi and Peugeot lead at the end of leg two.

Peugeot driver Gilles Panizzi holds a relatively comfortable lead on the 11th round of the FIA World Rally Championship, the Sanremo Rally, which continued in northern Italy today.

The Frenchman inherited the top position when overnight leader Jesus Puras crashed his Citroen Xsara on today's second special stage, and he then built a lead of more than 40 seconds. The second Xsara of Philippe Bugalski also crashed and then retired with fuel pump problems shortly after Puras but the third car, driven by FIA Super 1600 Cup leader Sebastien Loeb, has moved into second place ahead of Peugeot's Didier Auriol.

Championship challengers Colin McRae and Tommi M?kinen have endured another long day, however. Both have been marginally happier with their cars after yesterday's problems were slowly solved, but it now seems unlikely that either will add to their points tally in the drivers' series.

At Peugeot Didier Auriol's 206 WRC has been reliable today, but the cars of Gilles Panizzi and Marcus Gr?nholm have been hit by occasional gearbox glitches. Panizzi lost the downshift on his steering wheel 'paddle' on today's fifth stage and had to resort to the manual stick, while Gr?nholm's 'box started to upshift of its own accord in the same stage. The Finn also had to cope with bent suspension after he clouted a wall in SS7b.

Gilles Panizzi lost a few seconds to overnight leader Jesus Puras on today's first stage but in the second, it became academic when the Spaniard crashed out. When Philippe Bugalski retired as well, Panizzi was handed a comfortable cushion and he matched his rivals' pace thereafter. The retirements of the Citroens promoted Didier Auriol to third, then second as he swapped seconds - and places - with Sebastien Loeb. The 1994 world champion eventually had to settle for third overnight.

Marcus Gr?nholm lost time when he smashed his car off a wall on today's second stage, but the reigning world champion quickly recovered and moved back past Carlos Sainz into fourth.

Gilles Panizzi said: "It definitely got easier when Philippe and Jesus retired, but I still have to keep my concentration. Running first on the stages can sometimes be difficult because I find the patches of loose gravel on the outside of corners. There's no doubt that the car is working very well, although I think perhaps the Citroen is a little easier on its tyres so it's better in the long stages. Tomorrow's a short day but lots could still happen, so I have to concentrate."

Didier Auriol noted: "I've been pushing hard and attacking, of course, but I haven't been taking stupid risks because in the end, Sebastien isn't registered for manufacturers' points. It's turning into a good fight, though!"

Meanwhile over at Citroen Philippe Bugalski's Xsara WRC retired on today's third stage when its fuel pump malfunctioned and the engine was left with zero fuel pressure. Jesus Puras's example had to retire with suspension damage on the day's second stage. But Sebastien Loeb's example has been reliable.

Jesus Puras extended his overnight lead by a second on today's first stage, but the Spaniard then threw away his advantage when he crashed out on the next stage. Philippe Bugalski was less than pleased with his car's handling on the first couple of stages (he spun and lost around 45 seconds in SS7b) but then the Frenchman was forced to retire with a broken fuel pump in SS8. Sebastien Loeb benefited from his team-mates' retirements but the FIA Super 1600 Cup leader set his first ever fastest time in the world championship to move into second overall in SS7b. Thereafter, he and Didier Auriol swapped seconds but the younger charger gained upper hand by the late afternoon to hold second overnight.

Jesus Puras said: "I was too quick into the corner and we hit a wall, breaking the suspension. We just couldn't go on. I'm disappointed, of course, but these things sometimes happen when you're trying to win a rally against such good drivers and good cars. At least we've shown again that we can be competitive and I'll be back to aim for a victory again in Corsica."

Philippe Bugalski added: "I spun in SS7b and broke the front bumper, and then I lost time because I had to reverse back and forth to get back onto the stage. Then on the next stage the engine died because of no fuel pressure. It's hard for me and the team but that's life sometimes."

Sebastien Loeb continued: "It's been a very good day for me. I'm delighted to get my first scratch times, of course, but it's also good that we've kept Marcus, Carlos and the rest behind us and put Didier under so much pressure. I hope I can continue this tomorrow and get a good finish for me and the team, so I'm pushing but not taking big risks."

Ford engineers took until today's second service to finally cure Colin McRae's differential problems. The other Focus WRCs of Carlos Sainz and Francois Delecour have been reliable.

Punctures cost Carlos Sainz valuable seconds today though as the Spaniard tried to fight with Marcus Gr?nholm, team-mate Fran?ois Delecour, Renato Travaglia and Petter Solberg. He still held a points placing as he returned to Sanremo, though. Delecour lost time with tyre problems and then stalled on the line in SS9. He dropped behind Travaglia and Solberg as a result, although the Norwegian's last-stage problems brought Delecour back to seventh. McRae inched into the top ten once his transmission problems were cured, but the Scot now only has very faint chances of bagging a drivers' point. A puncture on today's fifth stage didn't help his cause either.

Carlos Sainz said: "We've had some bad luck with punctures today but when the stage has lots of corners where you cut it's always a possibility. I don't know what more we can achieve here - we'll just keep trying, see if we can stay ahead of the guys we've been fighting with and maybe take some points from here."

Colin McRae noted: "We're not sure what solved the transmission problem but the team changed electronic and mechanical parts. But it's really too late for us - all we can do is push for manufacturers' points - any hopes of a drivers' point went out of the window yesterday. All we can hope to do is keep Tommi behind us."

At Subaru Toshihiro Arai retired from the event on today's first stage when his left-front wheel sheered its nuts and left the Japanese driver stranded. Markko Martin inflicted rear suspension damage on his Impreza on the next test, while Petter Solberg knocked his right rear lateral suspension link out of line on the day's last stage.

Petter Solberg set his first fastest time on asphalt today as he began to put pressure on Renato Travaglia, Fran?ois Delecour and Carlos Sainz. But the young Norwegian's hopes took a knock on the last stage, when he hit a rock and damaged his right-rear suspension. Markko Martin had already dented his chances on the day's second stage by hitting a wall and badly damaging his rear suspension. He lost more than three minutes as a result. Toshihiro Arai, meanwhile, was forced to retire on the day's opening stage when his Impreza lost its left-front wheel.

Petter Solberg said: "We had a lot of front tyre wear in the long stage so we swapped them to the rears for the last test. But about two kilometres into SS12, we slid wide and hit a rock. It damaged the lateral link at the right rear. It's a shame it happened because we'd set some really good times today."

His team-mate Markko Martin noted: "The accident was my fault. I think I had marked the braking point too late in my pacenotes because by the time I'd hit the brakes, the car was flying over a bump. After that I just seem to have lost some of the speed I had yesterday."

Mitsubishi Ralliart managed to solve the transmission problems that blighted the Lancer WRC's first day of competition yesterday, so Freddy Loix and Tommi M?kinen have been able to experiment with set-ups today. M?kinen did complain of further glitches in the rear differential in today's second loop of stages, though.

Despite several retirements, both Mitsubishis still lie outside the top ten as both Tommi M?kinen and Freddy Loix finally start to experiment with set-ups on their new cars. M?kinen felt that the front end of his Lancer WRC was rolling too much in long corners, causing understeer, while Freddy Loix's pace varied depending on how good a solution he found in his latest batch of suspension settings. M?kinen arrived back in Sanremo in 11th, Loix in 13th.

Tommi Makinen said: "It's clear that we still have a lot of work to do and I'm not sure how much can be done before Corsica, because even when the transmission's working we are needing more speed. The handling hasn't really been perfect here - we're both getting too much understeer."

At Skoda the Octavia WRCs of Bruno Thiry and Roman Kresta have been reliable today. Bruno Thiry has experimented with damper and spring settings, and the Belgian is now more confident with his Octavia over the bumpier Italian roads than when the rally started. He still lies outside the top ten, along with his team-mate Roman Kresta. The Czech driver continues to enjoy his experience-building run.

Bruno Thiry said: "Before, the car was bouncing all over the place on bumps and it felt very nervous. I'd no confidence with it. Now I'm much happier - we've really found some improvements in set-ups during this rally. I'm not sure they'll be useful in Corsica in two weeks, though, because that's a completely different type of asphalt."

The sole remaining Hyundai Accent WRC2 of Alister McRae retired after the penultimate stage of the day with brake problem. The Scot said: "I'm obviously disappointed we had to retire but I'm more frustrated after making a silly mistake yesterday and losing all that time. We've driven as hard as possible today and managed to regain 21 places, and after the number of problems everyone has been having we thought we might still be in with a chance at getting manufacturer points. But by the end of stage 11b our brakes had softened so much that it wouldn't have been safe to continue. Now we just have to look forward to getting a better result in Corsica."

Of the other teams two non-manufacturer World Rally Cars have moved inside the top ten today. The Peugeot 206 WRC of Renato Travaglia challenged Carlos Sainz for fifth this afternoon (the Italian ended the day in sixth), and Simon Jean-Joseph's 206 fended off Colin McRae to hold ninth, just five seconds behind Petter Solberg.

Andrea Dallavilla continues to lead the FIA Super 1600 Cup section in his Fiat Punto, although the 'feeder' category crews missed a couple of stages thanks to a rally-delaying accident for Daniel Carlsson's Toyota Corolla. Cedric Robert overcame an engine misfire to be the Italian's nearest challenger in the 1600cc class, ahead of Giandomenico Basso.

Henrik Lundgaard still holds a commanding advantage in the FIA Teams Cup section, ahead of title rival Pasi Hagstrom (who's tackling his first asphalt event). Alex Fioro, meanwhile, has extended his lead in the Group N category for more standard machinery, but fourth-placed Gabriel Pozzo remains on course to lift the Group N world title.

Rally Statistics:

Starters: 61 cars (48 Group A + 13 Group N) started the rally

Retirements: Bugalski (F), Puras (E), Arai (J) + 10 other drivers

Today - Saturday 5 October: Leg 2 started from Sanremo at 06h00 and covered 520.35km, including 142.01km on eight special stages.

Tomorrow - Sunday 6 October: Leg 3 starts from Sanremo at 06h00 and covers 381.71km, including 87.66km on four special stages. The first car is expected at the final control in Sanremo at 16h00.

Weather forecast: Staying dry, although there remains a chance of showers in the mountains.

Stage by stage summary - Leg two:

SS7 Passo Teglia 1 (14.32kms):
1. Puras (E) Citroen 10m 25.6
2. Panizzi (F) Peugeot 10m 26.8
3. Gronholm (FIN) Peugeot 10m 28.7

Leaders after SS7:
1. Puras (E) Citroen 1h 42m 07.0
2. Panizzi (F) Peugeot 1h 42m 09.7
3. Bugalski (F) Citroen 1h 42m 27.2

SS7b Molini 1 (25.29kms):
1. Loeb (F) Citroen 16m 52.6
2. Delecour (F) Ford 16m 59.0
3. Panizzi (F) Peugeot 16m 59.1

Leaders after SS7b:
1. Panizzi (F) Peugeot 1h 59m 08.8
2. Loeb (F) Citroen 1h 59m 36.9
3. Auriol (F) Peugeot 1h 59m 40.7

SS8 Perinaldo 1 (12.16kms):
1. Auriol (F) Peugeot 7m 43.9
2. Panizzi (F) Peugeot 7m 44.6
3. Solberg (N) Subaru 7m 45.6

Leaders after SS8:
1. Panizzi (F) Peugeot 2h 06m 53.4
2. Auriol (F) Peugeot 2h 07m 24.6
3. Loeb (F) Citroen 2h 07m 25.5

SS9 Perinaldo 1 (19.44kms):
1. Solberg (N) Subaru 11m 35.8
2. Gr?nholm (FIN) Peugeot 11m 35.9
3. Panizzi (F) Peugeot 11m 36.8

Leaders after SS9:
1. Panizzi (F) Peugeot 2h 18m 30.2
2. Loeb (F) Citroen 2h 19m 02.4
3. Auriol (F) Peugeot 2h 19m 06.6

SS10 San Bernardo 2 (19.03kms):
1. Panizzi (F) Peugeot 11m 58.0
2. Gr?nholm (FIN) Peugeot 11m 59.4
3. Loeb (F) Citroen 12m 01.5

Leaders after SS10:
1. Panizzi (F) Peugeot 2h 30m 28.2
2. Loeb (F) Citroen 2h 31m 03.9
3. Auriol (F) Peugeot 2h 31m 06.6

SS11 Nava 2 (14.32kms):
1. Auriol (F) Peugeot 10m 23.0
2. Travaglia (I) Peugeot 10m 23.2
3. Panizzi (F) Peugeot 10m 23.4

Leaders after SS11:
1. Panizzi (F) Peugeot 2h 40m 47.6
2. Auriol (F) Peugeot 2h 41m 29.6
3. Loeb (F) Citroen 2h 41m 30.5

SS11b Passo Teglia 2 (25.29kms):
1. Loeb (F) Citroen 16m 43.7
2. Gr?nholm (FIN) Peugeot 16m 51.4
3. Auriol (F) Peugeot 16m 52.3

Leaders after SS11b:
1. Panizzi (F) Peugeot 2h 57m 41.2
2. Loeb (F) Citroen 2h 58m 14.2
3. Auriol (F) Peugeot 2h 58m 21.9

SS12 Perinaldo 2 (12.16kms):
1. Panizzi (F) Peugeot 7m 41.6
2. Auriol (F) Peugeot 7m 42.7
3. Loeb (F) Citroen 7m 43.1

Leaders after SS12:
1. Panizzi (F) Peugeot 3h 05m 22.8
2. Loeb (F) Citroen +34.5
3. Auriol (F) Peugeot +41.8
4. Gronholm (FIN) Peugeot +1m 10.5
5. Sainz (E) Ford +1m 36.4
6. Travaglia (I) Peugeot +1m 40.8
7. Delecour (F) Ford +2m 09.8
8. Solberg (N) Subaru +2m 53.3
9. Jean-Joseph (F) Peugeot +2m 58.7
10. C.McRae (GB) Ford +3m 27.0