Techs, retailers drive eurostocks lower, oils up

Technology and retail shares pushed European bourses lower yesterday afternoon, but Philips Electronics bucked the downward trend, while oils rose with crude prices amid heightened fears of a US-led war on Iraq.

By 1507 GMT, the FTSE Eurotop 300 index was off one per cent at 905 points.

"We are meandering along with the rally just about intact but we have clearly lost much of the momentum," said David Thwaites, European strategist at BNP Paribas.

A rally from mid-October has lifted the Eurotop 300 by about 15.5 per cent from the five-and-a-half-year lows of October 10, but in recent sessions, the advance has fizzled out.

"We are in a limbo period. What is the next catalyst? It's probably not corporate earnings until January and February, Iraq has gone quiet for the time being, and it's also fairly quiet in economic news," Thwaites said.

Philips was up 2.2 at 18.70 euros, after Europe's top consumer electronics maker reassured investors with a positive trading update, helping it to buck weak sentiment in the tech sector.

Oil stocks were also strong as crude oil prices rose amid doubt that UN weapons inspections in Iraq could avert a US-led war with the oil-rich country. Sector leader BP was up 1.2 per cent at 418-1/2 pence and the DJ Stoxx energy index tacked on 0.9 per cent.

The DJ Euro Stoxx 50 index that tracks euro zone blue chips, shed 1.6 per cent to 2,530 points.

On Wall Street, the Dow Jones industrial average fell 0.8 per cent to 8,412 points, while the Nasdaq Composite shed 1.3 per cent to 1,375 points.

The tech sector was hit after Deutsche Bank downgraded its ratings on telecom equipment makers Ericsson and Alcatel to "sell" from "hold", saying the two "junk-rated" stocks continue to demonstrate large volatility.

Alcatel was down six per cent at 4.98 euros, with Ericsson shedding 4.8 per cent to 8.9 Swedish crowns.

The downgrade rippled through the sector, helping to send rival Nokia down 4.4 per cent to 17.56 euros.

The retail sector was hit by a 4.7 per cent slide to 18.25 euros in German department store Karstadt Quelle as brokers cut their ratings on the stock following the group's profit warning for 2002.

Karstadt's woes sent a chill through others in the sector, with France's Galeries Lafayette off four per cent at 115 euros, while Sweden's Hennes & Mauritz dropped 3.3 per cent to 190.50 Swedish crowns.

UK clothing retailer Next sank 4.6 per cent to 811 pence after Investec Securities cut its recommendation on the stock to "hold" from "buy", noting there were signs of intensifying competition.

A lacklustre outlook from US home-improvement giant Home-Depot did little to help sector sentiment on the day after the world's biggest retailer, Wal-Mart gave a disappointing sales forecast, all serving to cast doubt on the resilience of consumers to keep the economic recovery on track.

On the data front, US consumer prices rose by 0.3 per cent in October, as expected, and the trade deficit for September came it at $38.03 billion, roughly in line with market expectations.

"We think it will lead to an upward revision of the GDP numbers because the deficit was less than the US government was expecting," said Kevin Gaynor, an economist at UBS Warburg investment bank.

"Regarding the consumer prices, they show the downtrend in inflation is moderating," Gaynor added.