By Peter Starck
FRANKFURT, Jan 25 (Reuters) - European stocks ended flat on
Friday, and down 2 percent for the week, as a steep slide in
shares of financial group Fortis <FOR.AS> on market talk of a
profit warning was offset by a rise in tech stocks.
Having risen as much as 1.2 percent in early dealings, the
U.S. benchmark S&P 500 index <.SPX> was slightly in the red as
markets in Europe closed.
Wall Street's downturn, which saw Europe's top index wipe
out intra-day gains of 2 percent, was attributed to a sell-off
in defensive stocks, which rose earlier in the week.
The FTSEurofirst 300 <> index of top European shares
finished unchanged on the day at 1,330.42 points. It is down
11.7 percent this year but 8.8 percent above the 14-month low
hit in intra-day trading as recently as Wednesday.
"Investors should be prepared for stock markets remaining
unpredictable also next week due to increased volatility," Erste
Bank said in a note.
"More panic-like selling can be expected over the short
term," Raiffeisen Research said.
"Downside risks continue to be predominant," the bank added,
cutting its forecast for the DJ Euro Stoxx 50 <> index
to 3,600 points by end-March. That index of European blue-chips
lost 0.8 percent on Friday, closing at 3,777.06 points.
Dutch-Belgian Fortis, a member of the DJ Euro Stoxx 50, fell
10.9 percent and Benelux rival ING Groep <ING.AS> dropped 5.2
percent, with traders citing market talk of profit warnings and
rumours of a Fortis rights issue. Both banks declined comment.
"Balance sheets of the Benelux stocks may be hit by large
losses on subprime assets and lower equity and real estate
prices, whilst margins should come down reflecting higher
wholesale and retail funding costs," Dresdner Kleinwort said.
"We have substantially cut our estimates for ING and
Fortis," Dresdner said in a note.
The DJ Stoxx insurance index <.SXIP>, to which ING belongs,
was the day's leading sectoral loser with a drop of 2.7 percent.
SOCGEN FALLS AGAIN
French bank Societe Generale <SOGN.PA>, which on Thursday
revealed the biggest rogue trader scandal in history, fell a
further 2.6 percent on Friday as analysts at UBS, Deutsche Bank
and Goldman Sachs downgraded the stock.
Of the main national benchmark indexes, the French CAC 40
<> fell the most, 0.8 percent. Britain's FTSE 100 <>
and Germany's DAX index <> both slipped 0.1 percent.
Citigroup said more interest rate cuts by the U.S. Federal
Reserve and depressed stock market valuations could provide a
floor for European equities in the coming one to three months.
"This does not mean that we have reached the lows of this
sell-off, but we think that we could be close. We need more
information from the real economy and from companies," Citigroup
said in a note, adding, "Downside risks are material."
UniCredit strategists also saw prospects of a stabilisation.
"The P/E (price-earnings ratio) of the STOXX 600 <> is
roughly 10.8 times and near its 5-year low, while the dividend
yield of the Euro STOXX 50 is currently 4.3 percent and,
therefore, clearly above the 10-year Bund yield <EU10YT=RR>."
Finland-based Nokia <NOK1V.HE>, the world's top cellphone
maker, rose 1.9 percent, adding to hefty gains the previous day
after it posted better-than-expected fourth-quarter earnings.
"Nokia has evolved into a new beast. Rivals have been
contemptuously swept to one side, leaving Nokia as the
undisputed king of the jungle," said Nomura, which raised Nokia
to "buy" from "neutral".
Goldman Sachs, UBS and WestLB also upgraded Nokia.
Technology stocks recorded Friday's best performance in
Europe with a rise of 1.8 percent on the DJ Stoxx sector index
<.SX8P>, with Swedish telecoms equipment maker Ericsson
<ERICb.ST> advancing 4.5 percent ahead of the release of its
quarterly results on Feb. 1.
Higher metal prices lifted some mining stocks. Rio Tinto
<RIO.L> rose 3.9 percent, underpinned also by its chief
executive saying rival BHP Billiton's <BLT.L> all-share takeover
bid was "two ball parks away" from fair value.
German sports car maker Porsche <PSHG_p.DE> rose 2.6 percent
after it reported preliminary first-half results showing it sold
19 percent more cars in the period and revenues rose 14 percent,
more than analysts had expected.
(Additional reporting by Blaise Robinson in Paris and Sitaraman
Shankar in London; editing by Rory Channing)
