Aventis, Generali drag Europe stocks a notch lower

European blue-chip shares closed just lower yesterday as hefty losses from heavily weighted insurance and pharmaceutical stocks offset strong climbers in the auto and retail sectors.

Italy's largest insurer Generali dragged its European sector down on news Merrill Lynch had sold 31.3 million of its shares at a discount to the market price.

Ireland's Elan was another standout decliner, diving 30 per cent after the drugs firm warned it risked collapse as a delay in the filing of 2002 accounts with US regulators could put it in default with some bondholders.

By 1535 GMT, and with only Frankfurt still officially trading, the pan-European FTSE Eurotop 300 was 0.1 per cent lower at 859 points, while the narrower DJ Euro Stoxx 50 also fell 0.16 per cent to 2,450.

Strategists said further market correction was in the offing as what they expect to be a disappointing quarterly earnings season unfolds and as companies fail to give clear guidance for forthcoming quarters amid a persistently fragile environment.

"Markets are bound for some pretty nasty earnings newsflow as second-quarter results will be quite disappointing for some European companies and forecasts are still hugely optimistic," said Commerzbank strategist Rolf Elgeti.

But Elgeti added relatively unattractive bond and cash markets continued to play in favour of equities and would prevent a massive rush out of stocks, even if earnings come in much worse than expected.

"There will be a gradual slide in stock markets but if we lose five to 10 per cent in European equities, I think it would be quite a lot."

London's FTSE 100 closed 0.6 per cent lower at 4,042 points, the French CAC-40 ended off 0.2 per cent at 3,104 in Paris and the Swiss Market Index nudged 0.3 per cent higher at 4,848.

Buoyant shares in German carmakers DaimlerChrysler and BMW hoisted Frankfurt's DAX 0.9 per cent higher at 3,227 by 1540 GMT, and on Wall Street the Dow Jones industrial average added 0.4 per cent while the tech-laced Nasdaq rose 1.3 per cent.

A declining euro against the dollar and hopes of better demand in the key US vehicle market fuelled gains in the European auto market.

Italian industrial group Fiat unveiled plans to raise 1.8 billion euros ($2.1 billion) in fresh capital through a share issue and to cut thousands of jobs in a bid to return to breakeven next year.

Climbers included French retailer Carrefour and German rival Metro, which enjoyed a second day of gains after a positive broker note and encouraging economic data in Germany and amid widespread hopes of economic recovery and industry consolidation.

But prospects looked bleaker for pharmaceutical stocks as Aventis sagged 5.4 per cent on fears that a rival's generic version of its Lovenox drug may reduce the Franco-German group's share of the multi-billion anti-thrombosis market.

British building supplies group Hanson fell 8.6 per cent after it issued a warning on profits.