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Europe stocks end winning run
LONDON, England (Reuters) -- European shares ended lower on Tuesday as investors worried about stretched valuations after indexes earlier hit 2003 highs and banker Credit Suisse fell after saying it needed more cost-cutting. Germany's Commerzbank was another negative influence, slumping 4.3 percent as rumours swirled in the market of a profit warning. Commerzbank denied the rumours, saying it would book an operating profit for the third quarter. Chemical companies were in favour, led by a 3.5 percent rally for German heavyweight BASF, as confidence grew that an economic recovery would boost demand for chemicals. The FTSE Eurotop 300 index of pan-European blue chips ended 0.4 percent weaker at 934 points, having touched a 2003 peak of 940 points earlier in the session. Turnover was a moderate 2.9 billion euros and 35 stocks hit new 52 week highs, although declining stocks outnumbered those that rose. The narrower DJ Euro Stoxx 50 index finished 0.1 percent lower at 2,627 points, breaking a run of six consecutive higher closes. "There's still momentum in the marketplace but we do think it has gone beyond fundamentals right now," said Karen Olney, European equity strategist at Dresdner Kleinwort Wasserstein. "A lot of the cyclical sectors, especially in Europe where you have got the currency exposure, do looked stretched to us. The stretch could carry on a little bit further with this momentum behind it but when anything comes along to spook that momentum, you will probably see a bit of rotation into stocks that are yielding a bit more." Surprisingly strong U.S. economic data spurred the latest upward leg in European stocks, which have risen 37 percent from their March lows. Attention has switched to U.S. non-farm payrolls numbers due on Friday, with equity market bulls looking for confirmation that the positive signs elsewhere in the economy are filtering through to jobs growth. "The GDP growth numbers have been very strong, way above trend, and I think it's very difficult to imagine that the economy could continue to grow at that pace without starting to generate jobs," said Peter Dixon, economist at Commerzbank. In New York, the blue-chip Dow Jones industrial average was 0.1 percent firmer at 9,866 points after hitting a 17-month high on Monday, while the Nasdaq Composite Index also rose 0.1 percent to 1,970 points by 1635 GMT. Around Europe, London's FTSE 100 closed 0.1 percent lower, while Paris's CAC-40 ended down 0.4 percent. In Zurich, the SMI Index fell 1.3 percent and Frankfurt's DAX was off 0.1 percent. Credit Suisse beat market forecasts with a surge in third-quarter net profits, helped by cost cuts and asset sales, but the stock fell 5.3 percent after analysts said the bank's outlook signalled it was struggling to find new strategies to increase top-line revenue. Top-level management changes had a negative effect on several stocks including French retailer Pinault-Printemps-Redoute (PPR), which fell 4.8 percent on news that the chief executive and a key designer at Gucci would not stay on after PPR's takeover of the luxury goods firm is completed next year. British broadcaster BSkyB fell 0.7 percent after appointing James Murdoch, the son of majority shareholder News Corp's chairman Rupert Murdoch, as its new chief executive. "James Murdoch has no operational experience in the UK and, at the least, this will take time to acquire," Deutsche Bank said as it cut its price target on the stock by almost 12 percent while maintaining a "buy" recommendation. Among gaining shares, the world's largest chemicals company BASF rose 3.5 percent following a number of upbeat comments from its peers about improved trading in October. The DJ Stoxx chemicals index has climbed more than five percent in the past two weeks on expectations a U.S.-led economic recovery will boost demand. "BASF, with its broad portfolio of products, is likeliest to benefit from any upturn in the economy," said HVB analyst Andreas Heine. Telecom Italia gained 1.8 percent after its third-quarter results topped forecasts, while embattled Dutch retailer Ahold rose 1.0 percent on expectations shareholders will be offered a big discount in a cash call expected to be unveiled this week. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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