Eurostocks hit two-week low on insurer woes, NY

European equities hit two-week lows yesterday afternoon following disappointing results from the world's top two reinsurers, Munich Re and Swiss Re.

Wall Street also fell after new claims for US jobless benefits unexpectedly rose for the third consecutive week, raising the spectre of unemployment before the faltering US consumer.

"This data raises the risk of a weaker job market, reducing further the underlying confidence of the all-important US consumer and his willingness to spend," said Ed Teather, a European economist at UBS Warburg.

Ericsson swam against the tide, rising 4.6 per cent as the window to arbitrage between the world's biggest maker of mobile network's ordinary shares and the rights to its jumbo rights issue slams shut.

By 1101 GMT, the FTSE Eurotop 300 index was off 2.4 per cent at 940 points. The Euro Stoxx 50 index of euro zone blue chips shed 2.9 per cent to 2,649 points.

The Eurotop 300 is 16 per cent above the five-year intraday low hit on July 24 but faith in the rally has been dented by weak economic data from both sides of the Atlantic.

"We could retest the July lows in the coming months but it all depends on how the world's economies develop. The data out of Europe has not been encouraging recently," said Edinburgh Fund Managers' Sandison referring to the third successive fall in the German Ifo business sentiment survey published Wednesday.

Others in the market, though, have argued the market would likely remain range-bound for the foreseeable future because much of the bad news had already been discounted.

On Wall Street, the Dow Jones Industrial Average index was 1.33 per cent weaker while the tech-heavy Nasdaq Composite was off 0.98 per cent.

Investors largely took in their stride news that US gross domestic product rose 1.1 per cent in the second quarter, as the data was close to forecasts.

"The revisions are marginal and not something to get worked up about. The headline number was broadly as expected but there may be a small positive for European exporters in the fact US equipment and software expenditure rose slightly," said UBS's Teather, looking at the data from a European angle.

European markets were steered lower by disappointing results from the world's top two reinsurers, whose equity portfolios have suffered from the slump in stock markets this year.

Swiss Re, the world's number two reinsurer reported a shock fall in first-half net profit due to the rocky stock market while rival Munich Re, the world's leading reinsurer said it could no longer give a 2002 profit forecast.

Swiss Re shares were down 12.8 per cent, while Munich Re dropped 5.9 per cent. Many of Europe's other insurers were also caught in the downdraft.

"Underwriting has not been strong and investment returns have certainly not been great so I struggle to see how returns at insurers are going to grow year-on-year," said Jamie Sandison, a European portfolio manager at Edinburgh Fund Managers.

The world's second largest hypermarket chain Carrefour was a bright spot: its shares rose 2.1 per cent after French broker CAI Cheuvreux raised its rating on the stock to "outperform" following forecast-beating results on Wednesday.

Techs were under pressure as Morgan Stanley lowered its stance on the chip sector to "in line" from "attractive".

Franco-Italian chipmaker STMicroelectronics shed 1.8 per cent, while German chipmaker Infineon fell 4.7 per cent.