Market Watch

[Joemoney]

Eurostocks Near 9-Month Lows, NY Seen Down

By William Kemble-Diaz

LONDON (Reuters) - Weaker European markets hovered near nine-month lows by midday Thursday, dragged down by technology and telecom shares as U.S. stock index futures turned down amid doubts over the outlook for company earnings.

France Telecom and ARM Holdings led the fallers.

Dealers added that the specter of a double-dip recession had reared its ugly head after recent soft economic data, citing bearish comments by influential economist Stephen Roach of Morgan Stanley, and speculation that the next move in U.S. interest rates could be down not up.

While that is contested in some circles, the consensus among strategists was that there was no compelling reason for markets to head higher in the short-term.

"The scale of overinvestment in the boom period was so exceptional, we are now seeing an exceptional correction," said Antwerp-based Gert de Mesure, head of equity strategy at Delta Lloyd Securities.

A bounce in Finland's Nokia, after the world's biggest handset maker cut its sales forecasts but maintained its full-year earnings guidance, was short-lived as a deep gloom once again descended over the depressed technology sector, amid a U.S. anti-trust investigation into the global chip industry.

At 1122 GMT the FTSE Eurotop 300 index of pan-European blue chips was 1.9 percent weaker at 1,055 points, just eight points off last week's trough -- its lowest level since late September.

The narrower DJ Euro Stoxx 50 index shed 2.41 percent.

Europe's technology and telecom sectors were broadly back to levels last seen in 1997.

Fund managers, nonetheless, were reluctant to throw in the towel, citing areas in the old economy such as food & beverage and basic resources that had exhibited good capital discipline and were benefiting from an improvement in underlying demand.

They also noted that valuations in higher tech areas had improved as a result of recent market weakness.

"The market is still rewarding those sectors that deliver on their guidance and are even accelerating their earnings guidance, but some value is also beginning to appear in more depressed sectors, albeit very selectively," said Sarah Austin, a European equities fund manager for Barings Asset Management.

TWIN TELECOM TRAUMA

France Telecom said it had reached a tentative debt restructuring deal with lenders to its embattled German mobile operating partner MobilCom in return for a security convertible into the French company's shares.

No further details were available and the deal has yet to be signed, but that did not stop shares in France Telecom slumping by nine percent to new all-time lows.

BT fell 3.3 percent after Britain's telecoms regulator said competitors to the former monopoly would be allowed to offer a full phone service, including line rental and calls, through a new wholesale access product.

In a note, Bear Stearns said the move could have negative implications for BT.

Nokia fell 3.7 percent after the Finnish telecom equipment group lowered its forecast for second-half sales growth to "up to 10 percent" from an earlier forecast of at least 15 percent.

The stock earlier traded more than four percent higher in a knee-jerk reaction to news the Finnish group remained comfortable with its earlier stated guidance for full-year pro-forma diluted earnings-per-share of 0.83 euros.


CHIPS ARE DOWN

Staying in tech, chip makers and chip-related stocks were still spooked by Wednesday's news U.S. antitrust officials are investigating the $12 billion global memory chip industry.

German chip maker Infineon Technologies and British chip designer ARM fell 6.25 percent and 9.5 percent respectively.

Elsewhere, shares in Reuters Group hit an eight-and-a-half-year low as investors took fright at a plan to step up its cost-cutting drive.

The world's biggest provider of financial news and information said it would cut another 650 jobs to save an extra 100 million pounds a year -- but media analysts said some investors had taken the move as a sign revenues were under increasing strain.

Weak British retail sales data, meanwhile, gave investors a reminder about the fragile state of the economic recovery in Europe at a time when policymakers are thought to be considering a rise in local interest rates.

British clothing retailers Next and Marks & Spencer fell by 3.1 percent and 3.7 percent respectively.

Switzerland's second-biggest bank Credit Suisse fell 1.7 percent after it injected capital into its Winterthur insurance unit.

Credit Suisse said it was putting 600 million Swiss francs in fresh capital into Winterthur to reinforce its solvency margin, which had fallen due to negative financial markets and strong growth in its business.

http://biz.yahoo.com/rb/020620/markets_europe_stocks_6.html