Eurostocks pounded as weak dollar fears hit exporters

Porsche and fellow European carmakers slammed the region's stock indices to one-month lows yesterday as the weakening dollar raised fears of lower export revenues.

Weak insurers, whose equity portfolios inflate or decrease in tandem with stock market fortunes, and technology shares also weighed on European markets.

But Atos Origin bucked its sector's weak trend to surge 6.5 per cent after agreeing to buy most of Schlumberger's computer technology activities for 1.29 billion euros, in a deal vaulting the French company into the top flight of global IT services firms.

By 16155 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was off 1.9 per cent at 898 points, while the narrower DJ Euro Stoxx 50 index was down 2.6 per cent to 2,515 points.

Investors' attention was pinned on currency moves after the Group of Seven countries stressed the need for flexible exchange rates over the weekend, interpreted by dealers as an acceptance of a weaker greenback.

Other market watchers saw the G7 statement mostly as a victory for the United States - which has criticised Japan and China for keeping their currencies artificially weak against the dollar to protect exports - and said it would have only a short-lived impact on European equity markets.

"We talked a lot about the fact that the dollar was structurally weak against the euro three months ago but then the markets didn't care about it, whereas now all of a sudden they do care," said Commerzbank strategist Rolf Elgeti, who said he expected the move to be short-lived.

"This to me shows that the market is vulnerable and quite easy to scare, and therefore willing to take this kind of newsflow as an excuse to take profits."

Strategists said more correction was on the cards for European equity markets after the benchmark Eurotop 300 rallied as much as 36 per cent from a mid-March's six-year low, but added that hopes that economic recovery would boost profits still sustained sentiment.

Around Europe, London's FTSE 100 closed 0.7 per cent lower, while the CAC-40 shed 2.7 per cent in Paris and the Swiss Market Index lost 2.4 per cent. Frankfurt's DAX was 3.3 per cent lower by 1615 GMT.