Mixed U.S. data hits Europe stocks
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PARIS, France (Reuters) -- European shares ended Friday lower as mixed U.S. data hit economy-sensitive stocks such as autos, but staffing giant Adecco lent support after assuring investors its accounting woes would not hurt its results.
Stellar earnings from Canadian telecoms equipment maker Nortel Networks boosted European peers Ericsson and Alcatel, helping to offset losses in Novartis.
The Swiss drug giant was tipped as a white knight bidder for Franco-German peer Aventis, sending its shares 3.2 percent lower, even though people close to the situation said Aventis had not yet held talks with any other companies.
Schering further hit pharmaceuticals with the announcement it had stopped enrollment in the clinical studies on one of its drugs, sending its shares 4.3 percent lower.
After weeks of corporate earnings frenzy, a mixed bag of U.S. data shifted investors' attention back onto the macroeconomy. Concern that the recovery is not creating enough new jobs to keep consumers spending rekindled worries over the sustainability of this economic upturn.
The FTSE Eurotop 300 index closed off 0.5 percent at 982 points, its first down week in seven weeks with losses of one percent. The DJ Euro Stoxx 50 index shed 0.7 percent to 2,839 points, its lowest close in over two weeks.
European equity markets had rallied to levels unseen in about a year and a half as investors anticipated that economic improvements on both sides of the Atlantic would boost corporate profits.
Any evidence that lowers investors' expectations about the economic recovery or corporate fundamentals would send a strong sell signal to investors.
Economy in focus
U.S. gross domestic product grew at an annualized rate of four percent in the fourth quarter, short of the 4.8 percent economists had expected, with some "whisper" forecasts close to 6.0 percent.
Consumer spending, which accounts for two-thirds of U.S. economic activity, rose at a 2.6 percent pace in the fourth quarter, a sharp slowdown from the heady, tax cut-induced 6.9 percent gain of the prior three months.
Murat Toprak, economist at SG Equities, said the data were slightly disappointing but had sprung no nasty surprise, although he noted much-lower-than-expected public spending, which he said cut economic growth.
"All the doubts evolve around how the U.S. economy will react once the last wave of tax cuts is through. If the labor market has strengthened, we'll get in a virtuous cycle where growth is generating growth."
"But if employment remains weak, then the U.S. government will be boxed into a corner as there will be no more fiscal and monetary room of maneuver, and deflation scenarios may be looming back into the picture."
In another report, the Chicago Purchasing Management index jumped to 65.9 in January, its highest level since July 1994. It is seen as a precursor for the influential Institute of Supply Management index of business activity due on Monday.
Europe's leading stock market indices all closed in the red, with London's FTSE 100 off 0.5 percent, Frankfurt's DAX 0.9 percent weaker, Paris's CAC 40 off 0.7 percent and Zurich's SMI 0.6 percent lower.
Across the Atlantic, the Dow Jones industrial average was off 0.5 percent at 10,453 points, while the tech-studded Nasdaq Composite shed 0.2 percent to 2,065 points.
Economy-sensitive auto stocks led Friday's decliners, with Germany's DaimlerChrysler and France's Renault shedding one percent and 2.6 percent respectively.
Oils also weighed. Royal Dutch/Shell and Total fell the most as energy traders and analysts said pointed to a downward correction in crude oil prices when the northern hemisphere winter ends.
On the upside, Adecco said its accounting woes were not a major issue and that its results or finances would not suffer, pushing its shares 14 percent higher to 65.5 Swiss francs.
Elsewhere, the French stock market's first company debut in more than a year was marked by a 30 percent leap in the shares of Internet firm Iliad, a sign that investor appetite for dot-com names may be returning.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
