By Peter Starck
FRANKFURT, April 9 (Reuters) - European shares fell in early
trade on Wednesday, led by financials such as UK mortgage lender
HBOS <HBOS.L> on a brokerage downgrade, and miners which slipped
after acquisition talk around BHP Billiton <BLT.L> dissipated.
By 0910 GMT, the pan-European FTSEurofirst 300 index
<> was down 0.5 percent at 1,312.01 points, having fallen
0.8 percent on Tuesday. U.S. and Asian stock markets also fell.
"There's no driver that would take the markets up," said
Steffen Neumann, analyst at German bank LBBW.
"The corporate news flow from the United States is mainly
negative and that is affecting sentiment here (in Europe)."
Neumann pointed to U.S. package delivery company United
Parcel Service Inc <UPS.N>, which on Tuesday lowered its
quarterly earnings outlook, citing deteriorating U.S. economic
conditions and high fuel costs.
In Europe, UPS rivals Deutsche Post <DPWGn.DE> and TNT
<TNT.AS> saw their shares fall 1.6 percent and 2 percent
respectively.
"The profit warning of UPS is short-term bad news for the
European express companies, specifically Deutsche Post with
their significant U.S. operations," ING analyst Axel Funhoff
said in a note, adding that TNT was less affected as it has no
U.S. operations of its own.
Ericsson <ERICb.ST> shares reversed losses to trade up 0.33
percent after the company denied market talk that it was going
to issue a profit warning. It was due to hold a news conference
at 0930 GMT in connection with its annual meeting.
Shares in BHP Billiton fell 2 percent, leading miners lower
after a source close to top management at China's Baosteel Group
says he was not aware of any move to buy a stake in the world's
biggest miner.
The Australian newspaper had quoted unnamed sources in
Beijing as saying China was "in the early stages of planning to
snare a bigger chunk of BHP than the 9 percent stake in rival
Rio Tinto <RIO.L> it bought with U.S.-based Alcoa <AA.N> for $15
billion in a stock market raid in February."
HBOS fell 2.7 percent after Credit Suisse cut the stock to
"underperform" and slashed its price target to 565 pence from
890 pence.
"In an environment of a weakening housing and mortgage
market, and the many different ways that it affects HBOS, we do
not see how the shares can sustain any significant recovery for
now," Credit Suisse said in a note.
In fresh examples of financial sector woes, U.S. company
Washington Mutual Inc <WM.N> said on Tuesday it expects a large
quarterly loss, and German regulator BaFin suspended the
operations of the small Weserbank, calling for insolvency
proceedings after Weserbank was unable to cover operating costs.
MATERIAL VALUE IN BANKS
But JPMorgan, citing an improving mark-to-market environment
based on synthetic indices, reduced its estimate for writedowns
to be booked in 2008 by continental European wholesale banks to
21.4 billion euros ($33.67 billion) from 25.2 billion euros
earlier.
"There is material value within the banking universe and a
probability of capital raising is already priced into some
banks," JPMorgan said in a European equity research note.
The DJ Stoxx European insurance index <.SXIP> was down 1.3
percent and the banking index <.SX7P> fell 1 percent.
"The financials will remain volatile anyway, but more news
like what Washington Mutual said won't have much effect any
longer," said Giuseppe-Guido Amato, strategist at Lang & Schwarz
brokerage in Duesseldorf.
Shares in Banesto <BTO.MC> dropped 0.9 percent even though
the Spanish retail bank reported a net profit of 217.6 million
euros in the first quarter, up 16.1 percent and slightly ahead
of analysts' forecasts.
European companies scheduled to report earnings later in the
day include British jewellery retailer Signet Group <SIG.L> and
Swiss glue and chemicals maker Sika <SIK.S>.
"The corporate earnings reports, especially for
non-financials, will be very important in determining whether
we'll see pressure on share prices also from that front," Amato
said.
Two sets of economic data released on Wednesday highlighted
the resilience of European economies in contrast with the United
States, which according to the minutes of the Federal Reserve's
latest monetary policy meeting could see economic contraction
over the first six months of the year.
Germany's trade surplus unexpectedly widened to 16.4 billion
euros in February, beating market consensus, from 16.1 billion
euros in January.
And British factory output grew faster than expected in
February, by 0.4 percent on the month, above forecasts for a 0.1
percent gain. On the year, factory output rose 1.9 percent --
the strongest annual rate since December 2006.
(Editing by Rory Channing)
