Eurostocks fall as Zurich Fin, media hacked

European shares failed to build on last week's solid gains and slid in late trade yesterday as investors braced themselves for a pivotal week of economic data but mostly kept to the sidelines, amid fading rate cut hopes.

Sector leader Vivendi Universal led media stocks down on concerns about possible write-downs, while battered insurer Zurich Financial fell after disclosing its WorldCom losses late on Friday.

"The economics data released in the last few weeks have been dire and have wrought in the minds of the forecasting community a profound reassessment of prospective levels of global activity," said consultant Roger Nightingale of private Swiss bank Sarasin, as economists at Morgan Stanley slashed their global growth estimates for this year to 2.5 per cent.

But few economists expect the Federal Reserve to cut interest rates when its rate-setting committee meets today, although many now expect it to simply alter its view on the US economy to one of "weakness" from "balanced".

US data this week - starting with retail sales today and ending with the University of Michigan consumer sentiment index on Friday - will give both policy-makers and investors a chance to reassess the risk of a 'double-dip' recession and was seen dictating the market's tone over the rest of the week.

At 1601 GMT, with only Frankfurt officially trading, the FTSE Eurotop 300 index of pan-European blue chips was 2.3 per cent weaker.

That was after the index last week posted its biggest weekly gain in ten months, having plumbed five-year lows on July 24.

Declining stocks outnumbered the risers by about five-to-one, but with much of Europe enjoying their summer holidays trading volumes were dismal.

The narrower DJ Euro Stoxx 50 index shed 2.8 per cent and is nearly 30 per cent lower for the year to date.

On Wall Street, the Dow Jones Industrial Average index was 1.3 per cent lower while the tech-heavy Nasdaq Composite shed one per cent.

The DJ Stoxx media index was the worst-performing sector, losing 3.4 per cent after heavyweight Vivendi was hit by a report in France's La Tribune newspaper, which said the Franco-US firm might write down its assets by several billion euros in its half-year results tomorrow.

That prompted a 5.3 per cent fall in the stock and spooked the rest of the sector ahead of a busy week of media earnings.

Shares in British TV broadcasters Granada, BSkyB, and Carlton all lost around five per cent.

French advertiser Publicis, Vivendi as well as Dutch publishers Wolters Kluwer and VNU all report figures this week.

Industry data showing a 15 per cent fall in UK recorded music sales in the second quarter also weighed on media sentiment, pushing shares in music group EMI down 4.9 per cent.

Shares in Zurich Financial lost 5.4 per cent after Europe's third-largest insurer said on Friday that it made a capital loss of $100 million on investments in bankrupt US telco WorldCom.

That revived concerns about its ability to raise fresh funds to shore up a capital base that has been depleted by a misguided acquisition strategy and a global equities rout.

Staying in financials, Dutch insurer Aegon lost 5.7 per cent, CS Group dipped 3.4 per cent, and Europe's largest insurer Allianz lost 4.4 per cent.

The latter two groups also report results this week. Elsewhere, EADS closed 6.6 per cent down amid fears that the financial problems of major client US Airways might impact the European aerospace group's sales.

EADS said it was sticking to its forecast for 300 aircraft deliveries in both 2002 and 2003. US Airways, which sought US Chapter 11 bankruptcy protection on Sunday, had ordered 165 planes from EADS planemaker unit Airbus, of which 127 had already been delivered.

Meanwhile, Brazil continued to cast a pall over Spanish companies with major Latin American interests as traders studied the small print of last week's $30 billion IMF aid deal, intended to shore up crumbling investor confidence in the Brazilian economy ahead of October's presidential elections.

The IMF said it would release $24 billion to the next president on condition his government was committed to meeting certain tough budgetary targets, but investors fear one of two left-wing front-running candidates might demur and instead bring about a run on the local currency and a debt default.

Spain two biggest banks Banco Bilbao Vizcaya Argentaria and Banco Santander Central Hispano shed 5.1 per cent and 4.7 per cent respectively.