Eurostocks hit by US data shock, Prudential falls

European blue chips slipped yesterday, led by weak auto and energy stocks after a surprising decline in US consumer confidence raised fears about the pace of a global economic recovery.

Long hoped-for signs of an improvement in the US economy failed to materialise after consumer confidence fell to 76.6 from 83.5. Economists polled by Reuters had expected the confidence index to rise to 85.

"It is certainly a disappointment for the market, which has been caught on the wrong foot after previous encouraging data. The consumer confidence mirrors the lack of a recovery in the job market," said equities strategist Carsten Klude at MM Warburg in Hamburg.

The bleak consumer confidence picture outweighed the impact of earlier market-pleasing results from France's Alcatel and Swiss engineering firm ABB.

At 1552 GMT, with only Germany's DAX still officially trading, the FTSE Eurotop 300 index was down 0.47 per cent at 867.74 points, while the DJ Euro Stoxx 50 index lost 0.78 per cent to 2,467 points. Both indices had been about half a per cent higher before the consumer data.

Around Europe, London's FTSE 100 closed 0.28 per cent down, France's CAC-40 lost 0.71 per cent while the DAX was trading 0.29 per cent lower.

Among leading losers, British insurer Prudential tumbled more than three per cent after the group slashed its interim dividend by 40 per cent.

The Dow Jones industrial average was down 0.29 per cent while the Nasdaq Composite Index was 0.31 per cent weaker, after clawing back from earlier losses.

The DJ Euro Stoxx 50 index has gained 33 per cent and the benchmark FTSE Eurotop 300 some 27 per cent since mid-March but strategists said continued strength in the euro and weak growth in corporate revenues would hamper further gains.

"European markets have outperformed the UK and US in the rally so far but, going forward, Europe is going to struggle," said Rupert Thompson, global equity strategist at ETrade Securities.

"In Europe, it's all been cost-cutting or restructuring charges falling out and top-line (revenue) is going nowhere."

Shares in French communications gear maker Alcatel rose more than eight per cent after it eked out a second-quarter operating profit and kept on track to break even for the full year.

Investors also welcomed an improvement in operating margins at ABB in the second quarter, sending the company's shares up 6.5 per cent.

Another strong performer was British healthcare firm Amersham, which rallied nearly nine per cent after saying it was ahead of schedule to return its troubled drug discovery unit to profit.

United Business Media was one of the session's largest gainers, piling on 14.7 per cent to a 12-month high after the British publisher beat consensus profit forecasts.

Heavyweight telecoms firm Vodafone benefited from a better than expected result from US carrier Verizon Communications, gaining just under one per cent.