By Eva Kuehnen
FRANKFURT, March 19 (Reuters) - Technology and telecom
stocks dragged down European shares on Wednesday as a profit
warning by Sony Ericsson and Deutsche Telekom's <DTEGn.DE>
outlook disappointed markets, while mining stocks fell.
The pan-European FTSEurofirst 300 index <> closed 0.9
percent lower at 1,230.28 points after a rocky session, hitting
its intraday high at 1,255.77 and its low at 1,222.33.
The DJ Stoxx index of European telecoms shares <.SXKP> fell
3.3 percent with Deutsche Telekom slipping 6.9 percent as an
update by Europe's largest telecoms group for its fixed-line
unit was perceived by the market as a profit warning.
The company however confirmed its overall guidance.
Ericsson <ERICb.ST> fell 7.8 percent after its mobile phone
handset joint venture Sony Ericsson cautioned first-quarter
earnings could fall by more than half. The world's top mobile
phone maker Nokia <NOK1V.HE> slipped 5.9 percent.
The FTSEurofirst 300 index is down about 18 percent so far
this year, and is on track to record its worst quarterly
performance since the third quarter of 2002, as stock markets
around the world are hit by worries over the prospect of a U.S.
recession and the impact of the global credit crisis.
The U.S. Federal Reserve on Tuesday slashed U.S. interest
rates by a hefty three-quarters of a percentage point to 2.25
percent, lifting U.S. and Asian stock markets overnight.
But euphoria wore off in European trading as news of Sony
Ericsson's profit warning broke and speculation about further
subprime casualties among European banks swirled.
Britain's financial authorities also made a rare public move
to calm jittery markets, saying they were not aware of problems
at any UK bank and would investigate share price moves sparked
by unfounded rumours.
HBOS <HBOS.L>, Britain's biggest mortgage lender, tumbled as
much as 17 percent and closed down 7.1 percent. Royal Bank of
Scotland <RBS.L> fell about 2.9 percent and Alliance & Leicester
<ALLL.L> shed 2.7 percent.
"This has dampened the mood. It shows how nervous the
markets are. It also shows that negative news can distract the
market from following performances in the United States or
Asia," said Gerhard Schwarz, head of global equity strategy at
UniCredit.
Recent supporting measures should be seen as a
limitation of damage rather than a solution to the underlying
problem, he added. UniCredit now expects a slowdown in U.S.
economic growth at least in the first quarter of 2008 and
potentially expects further to come this year.
"We are not talking about a U.S. mid cycle downturn anymore,
we are talking about a recession," Schwarz said.
TELEKOM SUFFERS
Around Europe, the UK's FTSE 100 index <> was the
weakest performer, falling 1.1 percent, mainly due to weaker
trading mining stocks such as Rio Tinto <RIO.L>, BHP Billiton
<BLT.L> and Anglo American <AAL.L>, which each fell around 4
percent as prices for industrial metals dropped.
Lower oil prices <CLc1> weighed on shares of major energy
companies, including BP <BP.L> and Royal Dutch Shell <RDSa.L>
down more than 1 percent each.
Germany's DAX index <> declined 0.5 percent and
France's CAC 40 <> eased 0.7 percent.
Deutsche Telekom shares hit their lowest level since March
2003 as trading volumes mounted to almost four times the 90-day
average after it said it expected sales and earnings to decline
further this year -- however anticipating a slower decline than
last year.
"The news was not positive and that's deadly in this sort of
market environment. The market had hoped for a positive
surprise," the trader said.
Vodafone <VOD.L> was down 2.8 percent, Telefonica <TEF.MC>
down 1.4 percent. Telecom Italia <TLIT.MI> fell, hit by market
speculation that the heavily indebted telecoms company could
launch a capital increase, which the company however denied.
Meanwhile, car stocks bucked the trend and the DJ Stoxx
European autos index <.SXAP> was up 1.4 percent, with BMW
<BMWG.DE> as a stand-out gainer.
The world's largest premium carmaker added to the previous
session's gains, impressing markets with an upbeat 2008 outlook.
"In contrast to our concerns, BMW gave a reasonable 2008
outlook and reported solid 2007 results that make the stock a
real bargain at current price levels," UniCredit's Georg
Stuerzer wrote in a note to clients. Goldman Sachs also raised
its price target for BMW to 49 euros from 43 euros.
Strongest positive gainer in the FTSEurofirst 300 index was
BNP Paribas <BNPP.PA>, gaining 4.7 percent, while shares of
rival Societe Generale <SOGN.PA> drop 7.1 percent after BNP says
it won't bid for SocGen, which has been seen as a potential
target after suffering a massive trading scandal.
(Editing by Keith Weir)
