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Euro stocks pounded as war goes on
LONDON, England (CNN) -- Oils and autos led European shares down again Thursday amid dwindling hopes that a swift war in Iraq would bring a swift economic and business recovery. German reinsurer Munich Re was hit by news of a 5.7 billion euro write-down on the loss in value of stakes in German bank HVB Group and domestic insurer Allianz. Philips Electronics fell four percent to 15.5 euros after its chief executive said there was no sign the global economy was recovering and therefore Europe's top electronics maker would remain cautious about its financial targets. London's FTSE 100 closed down 1.69 percent to 3,729.10 while the CAC 40 blue chip index in Paris ended down 2.32 percent at 2,722.84. The Swiss SMI closed down 1.23 percent at 4,194.50. At 1715 GMT Frankfurt's electronically traded Xetra DAX was down 1.55 points at 2,539.45. Earlier at 1635 GMT, with just the Xetra DAX the broader FTSE Eurotop 300 index was down 1.9 percent at 773 points. The pan-European blue-chip benchmark is still up 13 percent from its March 12 six-year closing low, having rallied on hope that war in Iraq would be quick. The DJ Euro Stoxx 50 index fell two percent to 2,125 points. However, as U.S. President George W. Bush said fighting was "far from over," and as hostilities entered a second week, investors were reassessing the outlook, sending stocks lower, while safe haven bonds and gold rose, along with crude oil. (Iraq latest) "We need to book some solid results and see signs that the war might end sooner than indicated," Florian van Laar of Eureffect Asset Management in Amsterdam said. "It's difficult to look at the market with one eye and the war with the other, as you don't trust what you see. Comments coming out of companies are also not good, such as those Philips made," van Laar told Reuters. More companies said the war in Iraq would hit their bottom lines even after it ends. Car makers were among the big losers, hit by a sharp fall in French car maker Renault which fell after it said the war in Iraq meant demand in the U.S. and Europe would likely be at the lower end of the forecasts for fiscal 2003-2004 that the company gave in October. Renault shares dropped 5.5 percent to 31.18 euros. Shares in Air France fell five percent to 9.25 euros after the French airline warned it might not meet its profit target for this year due to weak market conditions aggravated by the war in Iraq. It unveiled plans to slash capacity and delay delivery of seven Airbus jets, which hurt European aerospace firm EADS (PEAD), which owns 80 percent of Airbus. EADS shares sank 5.4 percent to 7.8 euros. As shares in Munich Re (FMUV) sank 11.6 percent to 66.4 euros on news of its write-down. (Full story) Rival Swiss Re rose despite announcing it was also writing down the value of its investments, by 3.9 billion Swiss francs, due to the poor stock market. Swiss Re also cut its dividend for the first time since the 1906 San Francisco earthquake, but the shares gained 6.3 percent to 68.2 Swiss francs as investors reacted positively to the group's forecast of a return to profit this year. Elsewhere in the financial sector, shares in German bank HVB Group rose 0.6 percent to 7.7 euros after announcing plans to float 25 percent of Bank Austria. The float would be Europe's biggest initial public offering so far this year after the volume of equity issuance has slumped to its lowest for 10 years in the first quarter. Among flailing energy stocks, Spanish oil company Repsol shed 4.2 percent to 13.60 euros as the market absorbed a placing equivalent to three percent of its capitalization. Oil stocks were also hit after investment bank Dresdner Kleinwort Wasserstein downgraded the industry, saying it did not offer compelling value. In the retail sector, Boots Group (BOOT) sank 5.7 percent to 545 pence after saying annual profits would be at the low end of market expectations and that it was cutting 700 jobs to refocus on its core health and beauty product business.
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