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Blue-chips, autos drag Europe down
LONDON, England -- European markets were down after a three-day rally on Thursday as volatile financial stocks fell prey to profit-taking and German carmakers Volkswagen and DaimlerChrysler predicted dented profits. London's FTSE 100 closed down 1.70 percent at 3,899.00, France's CAC 40 blue-chip index ended down 2.01 percent at 2,903.04 and Zurich's SMI closed off 1.27 percent at 4,528.70. At 1600 GMT Frankfurt's electronically traded Xetra Dax was down 2.85 percent at 2,889.70. At the same time with only the Deutsche Boerse still officially trading, the FTSE Eurotop 300 index -- which closed at a three-month high and near break even for the year on Wednesday -- was 1.71 percent lower at 818 points. The narrower DJ Euro Stoxx 50 index eased 1.82 percent to 2,325 points. UK mining firms BHP Billiton, Rio Tinto and Anglo American also featured among Europe's top blue-chip fallers as negative currency impact coming through from the Australian dollar and the South African rand stoked fears about earnings, and the SARS virus threatened metals demand in Asia. Strategists said sentiment improved as many companies, mostly in the U.S., matched or topped first-quarter earnings' expectations, but weak economic and corporate fundamentals meant there could be little sustainable upside. "I still think markets are going through a relief rally after the end of the Iraqi conflict and as a number of earnings came in above very pessimistic expectations, but when I look at companies' sales, the dollar, oil prices or U.S. data, I see nothing there justifying a continuation of the rally," the head of research at a Swiss bank told Reuters. "We're starting to see growing doubt whether valuations can be justified, based on the corporate earnings that are coming through," Ian Richards, European equity strategist at ING Barings, told Reuters. "European shares have come a long way from lows seen in March, and I think we'll start to see some downgrades coming through in the second and third quarters," Richards said. "For stocks to go higher, the market needs some help from the economy, bond markets, the oil price and currency," he said. Automakers were among Europe's biggest decliners after Volkswagen reiterated that it expected a sharp fall in first-quarter profit and that 2003 operating profit would be below last year's. Volkswagen shares fell 3.4 percent. German automaker DaimlerChrysler sagged five percent after it warned its U.S. Chrysler unit would find it tough to meet its 2003 profit target and that group revenues would fall, despite beating expectations with first-quarter results. French peer Renault, which reports its first-quarter sales before Friday's open, closed off 2.7 percent, while tire giant Michelin slid seven percent after posting a 4.9 percent fall in first-quarter sales. In the financial sector, Fortis sagged seven percent after French utilities group Suez sold most of its over 10 percent stake in the Belgian-Dutch bank. Deutsche Bank (FDBK) shed four percent after Germany's largest bank said it would post a first-quarter net loss next week after taking more than a billion euros in charges for the sinking value of investments. (Full story) Elsewhere, volatile insurance stocks handed back some of their hefty gains of the past three sessions. Axa, AGF, Allianz or Aegon all fell between three and five percent. Other decliners included drugmaker Sanofi-Synthelabo, off 3.3 percent after posting a 5.6 percent rise in first-quarter sales, slightly shy of some forecasts, and amid concern over weaker U.S. demand for blood thinner Plavix. On the upside, French software firm Dassault Systemes bucked a weak technology sector to close six percent higher at four-month highs after posting stronger-than expected first-quarter results and promising higher sales and profitability this year.
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