Siemens, crude oil slide scupper European shares

German engineering group Siemens and bancassurer Fortis led European shares lower yesterday, with jitters over Iraq's elections and the impact of a slide in crude on oil stocks also weighing.

Shares in Siemens fell 3.5 per cent, initially hit by a downgrade on the stock to "sell" from Landesbank Baden-Wuerttemberg, which cited uncertainty over its loss-making mobile phone unit.

The losses accelerated late in the session with dealers blaming a lack of strong positive news from a conference call.

Paper stocks such as Norske Skogsin, Stora Enso, and UPM-Kymmene skidded on concerns about their upcoming results, dealers said.

The FTSEurofirst 300 index ended down 0.5 per cent at 1,054.44 points after hitting a new two-and-a-half-year high earlier in the session after news of a bumper $57 billion merger in the US consumer goods sector, with Procter & Gamble Co. to acquire Gillette Co.

The news spurred a jump in shares of European consumer goods companies such as French pen, lighter and razor maker Bic and UK household cleaning goods maker Reckitt Benckiser, on speculation it will spark merger activity in a sector long believed ripe for consolidation.

The DJ Euro Stoxx 50 index that tracks euro-zone blue chips, ended down 0.5 per cent at 2,955.89 points.

"The Dow is off 60 points and that is a lead for European markets. There is also the Iraq election on Sunday (tomorrow) and people are not sure how that is going to go. The US GDP figures were also weaker than expected," a member of Deutsche Bank's European equity focus team said.

The US economy grew at an annual rate of 3.1 per cent in the final quarter of last year, less than the 3.5 per cent expected, while inflation rose. Economists said the figures would not stop the Federal Reserve from raising US interest rates by a quarter of a percentage point when its two-day meeting ends on Wednesday.

Among the day's standouts, Belgian-Dutch banking and insurance group Fortis eased after announcing plans to make acquisitions and expand into more than 15 European countries while also increasing profits at existing businesses.

The stock fell three per cent in Amsterdam as analysts said the strategy update was less exciting than anticipated, noting the stock had already climbed sharply this year.

Shares in Electrolux eased 3.6 per cent after rival US home appliance maker Maytag Corp. reported a fourth-quarter loss after taking various charges, while also lowering its earnings guidance for this year.

Oil groups like BP and Total fell as crude oil prices skidded three per cent.

On a brighter note, France's L'Oreal, the world's biggest cosmetics company, gained 1.3 per cent on news of a 6.2 per cent rise in 2004 like-for-like sales, while also maintaining its profit outlook.

Fatigue appeared to set in as the market was readying for a wedge of big picture events next week.

"Next week is a very macro week with the Fed, State of the Union Address, Iraq elections on Sunday (tomorrow), the US payrolls - all the things that bond and currency markets get excited about," said Mark Tinker of Execution stock broker.

"This week's earnings in the US have come in better than expected as did European techs so we hit new highs on shortcovering," Mr Tinker said.