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Media stocks drag down Europe
LONDON, England -- Europe's leading shares fell back from three-month highs late on Tuesday, dragged down by weak media, auto and tech stocks. Strategists said the market was due a bit of a consolidation after surging by a fifth from last month's six-year lows, while relief about a potentially quick end to the war in Iraq gave way to concerns about a still troubled outlook for company profits. London's FTSE 100 closed 1.70 percent down at 3,868.80.6, the Swiss SMI 1.18 percent down at 4,465.00, while the CAC 40 blue chip index in Paris ended 1.44 percent down at 2,893.51. Amsterdam's AEX closed down 2.24 percent at 279.49. At 1620 GMT Frankfurt's electronically traded Xetra DAX was down 1.92 percent at 2,754.96. Earlier at 1544 GMT, with only Frankfurt still trading, the broader FTSE Eurotop 300 index of pan-European blue chips was off 1.7 percent at 809 points, while the euro zone Euro Stoxx 50 was down 1.4 percent. Trading volumes were slightly above average and declining issues outpaced advancers by almost five to one. "The market will hold on to most of its gains, but it should start drifting down once the focus shifts away from a successful resolution to the war and on to the weak underlying economy," said Rupert Thompson, global equity strategist at E+Trade. As if to underline that point, the European Commission slashed its euro zone growth forecast for 2003 to 1.0 percent from 1.8 percent. It also warned of a potential recession if the conflict in the Gulf dragged on and kept crude oil prices high. The world's largest advertising group WPP was the biggest blue-chip faller with a loss of 8.2 percent after its top client, U.S. car giant Ford Motor Co., said it planned to slash its administrative and marketing budget by a fifth over the next two years. The world's biggest mobile phone maker Nokia and Dutch electronic goods and chip-making giant Philips led technology stocks down, falling 4.1 percent and 5.4 percent each after U.S. wireless chip maker RF Micro Devices issued a profit warning. Auto stocks were the day's biggest losers. The DJ Stoxx Auto index fell 3.3 percent as BMW, Renault and Volkswagen sank by between five percent and six percent each. Traders said some investors took advantage of Monday's sharp gains to sell, based on nagging concerns that the outlook for discretionary consumer spending for big-ticket items had deteriorated in recent weeks. Shares in French utility Vivendi Environnement skidded 6.7 percent after sources told Reuters that analysts at Julius Baer had expressed concern that the group may not meet first-half operating profit forecasts. Traders said investors continued to focus on developments in Iraq, where U.S. forces blasted government targets in the capital Baghdad after trying to kill President Saddam Hussein and his sons with four huge bombs. (Full story) Strategists said there was still further upside potential as the remaining war risk premium unwound, but once the conflict ended the market faced the sobering realities of a stuttering economy and weak corporate earnings. "After the war there is going to be a sharp reckoning, and I suspect markets will have to correct to account for the fact that corporate earnings are looking extremely rocky and economic numbers on both sides of the Atlantic don't look great at all," Anais Faraj, global strategist at Nomura in London, told Reuters.
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