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ECB cut fails to lift Euro stocks
LONDON, England (CNN) -- European shares fell from four-and-a-half-month highs late on Thursday, as the European Central Bank's cut in interest rates failed to stop the surging euro. The London FTSE 100 index of leading shares closed down 0.54 percent at 4,104.30 points, the Zurich SMI closed down 0.88 percent at 4,706.60 and the French CAC 40 index dropped 0.97 percent to 3,034.07 points. The DJ Euro Stoxx 50 index of top euro-zone shares eased back 1.1 percent to 2,353.9 points. At 1700 GMT the Frankfurt Xetra DAX was down 0.61 percent at 3,061.35. In the telecoms sector, price war fears and lawsuit concerns hit cellphone operator Orange, negative broker comment weighed on British Telecom and hit Finland's Nokia as investors braced for next week's trading updates from the mobile phone-making giant. Weak U.S. jobless claims data piled on the pressure by undermining the case for a sustained recovery in the world's biggest economy, ahead of Friday's key U.S. employment report. "Tomorrow's payrolls numbers will dictate whether this setback lasts longer than today," said Rupert Thompson, global strategist at independent broker E+Trade told Reuters. Shares in Orange, which is owned by France Telecom and is the biggest mobile phone group in Britain by customer numbers, and smaller rival mmO2 slid 5.8 percent and 3.1 percent respectively. That was after 3 UK, the fledgling venture controlled by Hong Kong's Hutchison Whampoa, said it would undercut similar offers on the market by up to 50 percent by launching two new price packages for its third-generation mobile phones -- the first in Europe to also offer live video phone calls. A surge in the euro towards its all-time highs also weighed on exporters, as investors ignored the European Central Bank's widely-expected half-a-percentage-point cut in interest rates and mulled a possible cut in U.S. rates that would maintain the euro's chunky yield differential over the dollar. Euro-sensitive exporters such as Volkswagen and BASF fell between 2.5 percent and three percent each. Nokia led technology stocks down after investment bank Morgan Stanley trimmed its earnings estimates for the mobile phone maker, rattling investors ahead of second-quarter and mid-year trading updates due from the global leader next week. Shares in Nokia dipped 3.1 percent. Shares in BT fell 3.0 percent to 188.59 pence after investment bank CSFB cut its rating of the stock to "underperform" and set a price target of 175 pence. CSFB also downgraded Sanofi-Synthelabo, knocking its shares down more than four percent. But shares in HVB rose 3.6 percent after broker Merck Finck raised its recommendation, citing a better profits outlook for Germany's second-largest bank and expectations of improved investor sentiment towards the stock after the flotation of its Bank Austria unit in early July. Europe's biggest defence-equipment maker BAE Systems fared even better, soaring 9.0 percent after Deutsche Bank analyst Ben Fidler urged investors to buy the stock on the grounds that a U.S. merger now looked more likely as BAE pursued a deal with renewed vigour and potential obstacles were removed. Speculation about a transatlantic merger between BAE and Boeing Co has stirred for years.
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