Prudential, techs lead Europe down
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LONDON, England (Reuters) -- European shares fell on Tuesday as the insurance sector was hit by weaker-than-expected results from Britain's Prudential, and after a clutch of cash calls to investors and troubling German and U.S. data.
Technology, Europe's best performer in 2003 and so far this year, fell on concerns the sector's shares in Europe and the U.S. had pushed too far ahead of fundamentals.
Fund managers blamed the pull-back on high valuations, disappointing data, the dollar's failure to recover and an uncertain Wall Street.
"It's probably okay we go down for a while, and then we will get remarks the market is valued at the right levels. People will then feel more at ease and see buying opportunities," said Lex Werkheim of Eureffect asset management in Amsterdam.
Consolidation was inevitable after the market's 11-month run-up, and it was unclear where the next spur for the market would come from until the next earnings season, he added.
"Much depends on what happens in takeover land and interest rates, factors we can't predict yet," Werkheim said.
There was merger activity on Tuesday, but news that Denmark's Group 4 Falck was tying up with UK peer Securicor failed to excite the broader market.
The merger puts the heat on the security industry sector leader, Sweden's Securitas, whose shares fell.
UK medical devices firm Smith & Nephew surged 3.8 percent on fresh bid speculation.
The FTSE Eurotop 300 index of European blue chips closed down one percent at 1,002.69 points, just ahead of the 1,000 point mark it leaped on Feb 12 for the first time since August 2002.
Gains in defensive healthcare, tobacco, real estate and beverage stocks helped cap the market's fall. The DJ Euro Stoxx 50 index shed 1.4 percent to 2,866.04 points.
Standard & Poor's said some sectors were ripe for investors to cash in on their gains, such as technology stocks, which are trading at 25 times 2004 earnings, and media, at 20.5 times, well above the 16 times earnings level seen as reasonable for the European market.
"Importantly, our view is short term in nature and is not a call on the fundamentals of these sectors," said Clive McDonnell, a European strategist at S&P Equity Research.
As bourses shut, the Dow Jones industrial average was off 0.2 percent at 10,585 points, while the tech-laden Nasdaq Composite was flat at 2,006 points, stabilising after Monday's 1.5 percent slide.
News of a sharper-than-expected 30 percent drop in annual profit at Britain's second-largest insurer, Prudential, sent the group's stock down 4.5 percent to 487 pence and chilled the sector. Prudential also slashed its dividend for the first time since World War One.
Insurers topped Europe's blue-chip decliners' column, with Germany's Allianz, France's AXA, Dutch Aegon, and Swiss Re all down. Prudential's domestic rival Aviva, which reports on Wednesday, fell 2.3 percent.
The sector is also sensitive to any general pull-back in equities, which dents the value of insurers' extensive shareholdings.
Companies are also coming cap in hand to their investors to get hold of much-needed cash.
Swiss specialty chemicals firm Clariant asked for 920 million Swiss francs to repair finances on Tuesday, even after returning to profit last year for the first time since 2000, knocking its shares down eight percent.
French peer Rhodia aims to raise 450 million euros in April, instead of 300 million euros as indicated, the French daily La Tribune reported, though the company was unavailable for comment as the stock eased 1.7 percent to 3.45 euros.
German bank HVB Group fell 2.6 percent on reports it would raise up to three billion euros to digest write-downs and strengthen its balance sheet.
The day's main data provided little cheer as Germany's Ifo index of business confidence fell unexpectedly in February for the first time in 10 months as the euro rose to record levels against the dollar, sowing doubts about the strength of recovery in Europe's largest economy.
U.S. consumer confidence also fell unexpectedly in February as people worried that economic recovery was unable to create new jobs.
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