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European stocks end softer
LONDON, England (Reuters) -- European shares closed near their lows on Wednesday as investors took money out of cyclical stocks following strong gains recently and firms such as Danish drug maker Lundbeck plunged after issuing weak outlooks. Data showing the U.S. economy continued to improve failed to inspire ahead of key labour market data later in the week, while British stocks braced for a rise in interest rates on Thursday. The FTSE Eurotop 300 index of pan-European blue chips closed 0.7 percent weaker at 927 points on solid turnover of 3.0 billion euros. The narrower DJ Euro Stoxx 50 index shed 0.8 percent to 2,607 points. Analysts noted some movement out of stocks in cyclical sectors such as insurance, technology and automakers after a strong run which lifted pan-European indexes to 2003 highs earlier this week. "It is interesting that people have gone back into defensives recently. People are back into value, locking in those gains we've had...and seeing what happens in the lead up to Christmas,'' said Daniel Birch, a strategist at independent brokers Execution Ltd. "I still think there's another five percent upside to this market before the end of the year and I think the cyclical stocks will perform well in the run up,'' Birch said. Stuart Fraser, European fund manager at Standard Life Investments in Edinburgh, agreed it was too early to start taking a defensive position on equities. "To be quite frank, we're not even at the start of the European cyclical recovery. I'd rather wait until I'd had six months of decent cyclical recovery in the real economy and until cyclical companies become extremely overvalued before I decide to call a halt (on cyclicals).'' Around Europe, London's FTSE 100 closed 0.6 percent weaker and Paris's CAC-40 ended down 0.9 percent. In Zurich, the SMI fell 0.9 percent while Frankfurt's DAX closed 0.6 percent lower. JOBS DATA AWAITEDIn New York, stocks fell despite signs of a broadening in the recovery of the U.S. economy, where a larger-than-expected expansion of the massive services sector boosted hiring and growth in factory orders was recorded. The Institute of Supply Management's non-manufacturing index rose to 64.7 from 63.3 the previous month, topping forecasts for a fall to 63. But the blue-chip Dow Jones industrial average was 0.4 percent weaker at 9,798 points, while the Nasdaq Composite index was down 0.6 percent at 1,947 points by 1642 GMT. "The Dow is trapped in a rising wedge formation. This is potentially bearish and will probably end in tears,'' said David Franklin at stock broker and fund manager Christows. "The pattern may not yet be complete, and the Dow might push higher towards 10,000 or just above, but a break of the lower rising line of support will prompt a sharp downwards plunge.'' DISAPPOINTMENTS PUNISHEDInvestors showed little tolerance for European companies which disappointed on earnings and outlooks, with Lundbeck plunging 16 percent after cutting its full-year sales growth forecasts due to competition from generic drugs and troubles launching a new anti-depressant. Shares in Securitas, the world's largest security services group, fell nine percent after the company missed market expectations with third-quarter profit and issued a full-year profit warning. British retailer MFI Furniture also fell sharply, down 13.2 percent after reporting flat third-quarter sales, while indebted German real estate and investment firm WCM dived 11.2 percent after lenders to one of its unit called in their loans. Blue-chips on the move in Europe included the world's largest reinsurer, Munich Re, which fell 2.2 percent after JP Morgan downgraded the stock to "neutral'' from "overweight'' after a one-month rally added 22 percent to the share price. BNP Paribas, the eurozone's largest bank by market value, pleased investors with a stronger-than-expected 69 percent surge in third-quarter profits, but its shares fell 1.3 percent as dealers said the good news was already priced into the stock. Dutch trading company Hagemeyer bucked the weaker trend, gaining seven percent after its bankers agreed to extend a standstill accord until February, giving the company more time to finalise a refinancing deal. Norwegian paper maker Norske Skog added 1.5 percent after reporting it had swung back into profit in the third quarter and saw signs that the newsprint and magazine paper markets had bottomed. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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