Prudential leads eurostocks retreat

UK insurer Prudential and oil and technology stocks led a broad slide in European shares yesterday, with worry over Sars and the US economy compounding the gloom, but Credit Suisse perked up on a return to profit.

Investors face a daunting raft of European earnings next week, along with key US data and an update on the US economy from Federal Reserve Chairman Alan Greenspan.

Patchy economic numbers from the US hit sentiment, fuelling doubt that the strong advance from March's six-year lows had much further to run.

"The market, especially in the States, has done well for the month so far, so it's logical that some selling pressure came in when some economic numbers disappointed," said Lex Werkheim of Eureffect asset management in Amsterdam.

By 1540 GMT and with only Frankfurt still trading, the FTSE Eurotop 300 index was 1.2 per cent lower at 807 points, while the narrower DJ Euro Stoxx 50 index had shed 1.7 per cent to 2,271 points.

"We will have to swallow next week's earnings, and then we will live from economic number to economic number to see if, in the post-war period, there is proof of consumers coming back," Werkheim said.

The pullback was broad, with most sectors under water as declining issues outpaced advancers by nearly three to one in thin volume.

Defensive drug stock GlaxoSmithKline, Aventis and AstraZeneca were strong ahead of their earnings.

The Eurotop 300 is down 1.3 per cent for the week after hitting a three-month high on Wednesday.

The construction sector was a bright spot as French glass and building materials group Saint-Gobain rose 6.6 percent to 29.99 euros as investors cheered slightly better-than-expected quarterly sales.

There was concern that the SARS flu-like virus, which has killed more than 270 people, mostly in Asia, will deter tourism and dent earnings growth for airlines such as British Airways and travel groups like Germany's TUI.

Shares in Dutch airline KLM sank 7.9 per cent to 6.54 euros after announcing it was reducing the number of flights to Asia as SARS hits demand.

Prudential, the UK's second-largest insurer, dropped 3.8 per cent to 354-3/4 pence, hit by Morgan Stanley investment bank cutting its rating on the stock to "underweight" from "equal-weight". The bank said the group would need more capital or would have to cut its dividend further.

Swiss financial giant Credit Suisse jumped 5.3 per cent to 30.55 Swiss francs after staging a strong recovery in profitability during the first quarter.

German drug group Bayer rose 0.7 per cent to 16.62 euros after it forecast a double-digit rise in annual profit and said it had settled out of court many more lawsuits over anti-cholesterol drug Baycol.

Technology shares appeared ripe for some profit-taking. They, along with telecoms, are the only sector in higher territory for the year. Philips Electronics shed 4.2 per cent to 15.95 euros, while handset maker Nokia was down 3.9 per cent at 14.58 euros.

Around Europe, the German DAX fell 1.6 per cent, London was down 0.7 per cent, while Paris was 1.25 per cent lower.

On Wall Street, the Dow Jones industrial average shed 1.4 percent to 8,320 points, while the Nasdaq Composite dropped 1.4 per cent to 1,436 points.