Tech stocks, insurers weigh on European shares

Insurers and tech stocks led European shares lower in lacklustre trade yesterday as investors booked profits after key indices were pushed to 2003 highs last week on hopes of a US-led economic recovery.

US stocks also pulled back, despite upbeat data on the housing market, with some analysts suggesting soaring equity values since March had already priced in recovery after a three-year bear market.

"It's only natural that we are seeing some profit-taking, and investors are being more cautious," said Gert de Mesure, head of equity strategy at Delta Lloyd Securities in Antwerp.

"When you look at valuations on a number of stocks, you should question where they are going, especially in the technology sector."

While leading indicators were pointing to an improving global economy, many companies remain saddled with heavy debts that would restrict their ability to spend and drive revenue growth for some time yet, de Mesure added.

By 1535 GMT, with most markets across Europe closed, the DJ European Stoxx 50 index was down 1.1 per cent at 2,564 points, while the broader pan-European FTSE Eurotop 300 had shed 0.8 per cent to 904 points.

Declining stocks outnumbered advancers by a ratio of almost eight to one but turnover was wafer thin, with British financial markets closed for a public holiday.

The FTSE Eurotop 300 benchmark closed at an eight-and-a-half month high on Friday, having gained more than 30 per cent from its March lows.

"We have covered a lot of ground in the past two weeks as economic news has surprised on the upside, but it's difficult to see that strength continuing at the same pace," one Frankfurt-based trader said. "There is a risk that we have got ahead of ourselves to some degree."

In New York, the Dow Jones industrial average was down 0.5 per cent, while the Nasdaq Composite Index was off 0.6 per cent.

Data showed sales of existing US homes rose five per cent in July to a record high. Housing market strength, driven by record low interest rates, has been a key factor keeping US consumers spending, so preventing the economy from sliding deeper into recession.

Around Europe, France's CAC-40 fell 1.1 per cent and Zurich's Swiss Market Index closed down 1.5 per cent.

Germany's DAX, the only market still officially trading, was down 1.6 per cent.

Tech bellwethers such as mobile phone giant Nokia, down 1.7 per cent, and Siemens, down 2.2 per cent, led the DJ Stoxx technology index off Friday's eight-and-a-half month high.

Among the few pieces of corporate news, Deutsche Telekom said it would offer one billion euros to buy out the remaining 51 per cent stake of Poland's largest mobile operator, PTC. Deutsche Telekom shares were down 1.5 per cent.

Europe's biggest automaker Volkswagen was down 1.7 per cent after it unveiled the latest version of its best-selling Golf. VW said it expected to sell more than 600,000 of the new vehicles in 2004.

Volatile insurance stocks such as Munich Re, Axa and Allianz also weighed on the market as they suffered declines of between two and four per cent. Among leading European gainers, makers of anti-virus software and firewalls to protect computers from unauthorised attacks rose sharply as the fast-spreading Sobig.F e-mail virus slowed on Sunday.

In Helsinki, shares in Finnish Internet-based data security firm SSH Communications Security soared 20 per cent.

Elsewhere, debt-ridden Norwegian fish farmer Pan Fish, the world's number two salmon producer, jumped eight per cent after signing a deal to sell off several units.

In Spain, satellite pay-television company Sogecable was up 2.2 per cent after resolving a standoff with medium-sized Spanish football clubs over broadcasting rights.