Eurostocks unnerved by US data, SAP slides

European blue-chips were heading for a weaker close yesterday after data showed US consumers were not as confident or big-spending as expected, and software firm SAP fell after rival Oracle reported soft demand.

British chemicals firm ICI fell 2.9 per cent after analysts at Smith Barney downgraded their rating on it to "underperform", but troubled French engineering firm Alstom rallied 9.2 per cent on hopes the European Union will approve a controversial bail-out plan.

Stocks weakened across the board after the University of Michigan's US consumer sentiment index for September fell to 88.2, compared with economist expectations for the index to rise slightly to 90.

Weaker-than-expected US retail sales data for August had already knocked European shares.

Consumer spending, encouraged by borrowing costs at 40 year lows, has helped cushion the US economy but mounting debts and a soft labour market have raised doubts about it continuing.

"This is just one more sign showing that even if private revenues are rising thanks to tax cuts, consumers remain concerned by unemployment levels and their confidence in the economy is just not taking off," said SG Securities economist Olivier Gasnier in Paris.

By 1539 GMT, with most markets in Europe closed, the FTSE Eurotop 300 index was 0.7 per cent weaker at 902 points.

The benchmark is down two per cent for the week but a series of powerful surges since March has dragged it up more than a third from its six-year low.

The narrower DJ Euro Stoxx 50 index was down 1.0 per cent at 2,546 points.

Around Europe, Paris ended 0.7 per cent lower, London was flat and Zurich closed down 0.1 per cent. Frankfurt's DAX, the only market still officially trading, was 1.7 per cent weaker.

Some analysts believe European shares will underperform their American and Asian counterparts.

"In terms of our end-year regional index targets, we see absolute upside only to Japanese and US equities, while our end-year fair values for the UK and eurozone are marginally below current levels," JP Morgan said in a research note.

"However, we acknowledge the potential for European equities to continue to trade in expensive territory in an environment of strong newsflow and equity performance in the US".

Across the Atlantic, the Dow Jones industrial average was down 0.3 per cent at 9,428, while the technology-laced Nasdaq Composite fell 0.6 per cent to 1,836.

Oracle, the world's second-largest software maker, posted a 28 per cent rise in first-quarter profits but its sale of new software licenses slumped, spooking investors.

Oracle was down 5.2 per cent while German rival SAP was 3.9 per cent weaker.

"It does throw some cold water on the technology recovery story," Kaufman Brothers analyst Kevin Buttigieg said. "All along, the recovery was pretty uneven and I think this is a good testament to that."

Autos was the weakest sector, with the DJ Stoxx auto index down 1.6 per cent. DaimlerChrysler and Volkswagen were down 1.7 and 1.9 per cent respectively.

Belgian chemicals company Tessenderlo fell 2.9 per cent after the PVC producer posted below-consensus second-quarter results.

On the positive side of the ledger, Dutch airline KLM soared 8.2 per cent as investors anticipated the carrier will join Air France's SkyTeam alliance.

French aluminium company Pechiney firmed 0.8 per cent after its board said it had accepted a larger takeover offer from Canada's Alcan.

Takeover activity also boosted British department store chain Debenhams after CVC Capital and Texas Pacific bid an agreed £1.7 billion in cash, trumping a rival offer.

Swiss tech firm Kudelski jumped 8.7 per cent after the maker of digital television encoding and access systems posted a smaller-than-expected first-half operating loss and said it expected strong growth from 2004.