Nasdaq about-turn hits eurostocks; Vivendi shines

A Nasdaq-inspired slump in tech stocks nudged European markets into the red for the fourth-day running in late trade yesterday, countering a bounce in battered French media titan Vivendi Universal after favourable restructuring talk.

Also stemming the decline were selective telcos, as investors put some money to work in beat-up shares by creaming some profits from better-performing sectors, such as food and beverage - a trend strategists saw continuing over the next few months.

"We`ve seen many rallies in bombed out sectors in the last 18 months, but what makes this one different is that there is genuine value at the margins of the telecom and media sectors," said Robert Kerr, pan-European strategist for Bank of America.

Kerr added that he saw this process of rotation between the market`s current leaders and laggards playing itself out by the end of the summer, setting the stage for a broader market rally if the economic recovery remained intact.

At 1606 GMT, with most markets closed, the FTSE Eurotop 300 index was down 0.1 per cent at 1,211 points, while the narrower Euro Stoxx 50 index lost 0.12 per cent to 3,514 points.

Both benchmarks have been trading sideways since November after investors got carried away with their recovery expectations and shares rallied strongly from their lows in the aftermath of September`s attacks on the United States, buoyed by a series of interest rate cuts.

The two indices are in the bottom half of their six-month trading ranges largely because company earnings have struggled to meet those recovery expectations.

On Wall Street, the Dow Jones industrial average shed 0.41 per cent, and the tech-laden Nasdaq Composite turned weaker after a strong start, dropping 1.48 per cent and extending Monday`s two per cent drop.

The Nasdaq`s about-turn fed through to the DJ Stoxx index of leading European technology shares, which eased 1.66 per cent and raced to the top of the sectoral loser board.

Heading the tech fallers was German software powerhouse SAP , which fell 4.3 per cent.

Franco-American Vivendi gained 3.6 per cent and was the biggest blue-chip gainer after a French newspaper report that board members were mulling a plan to split up the world`s second biggest media group and spin off some assets.

Vodafone, Europe`s biggest wireless operator, rose in anticipation it will writedown assets when it reports results next week, clearing the way for action to salvage its battered share price. But its gains were pared in late trade, and by the London close, the stock had added 0.69 per cent.

British fixed-line incumbent BT Group, widely-regarded as a safe-haven within the sector because of its success in slashing its debt, jumped two per cent.

However, Deutsche Telekom, which still carries a debt burden of 60 billion euros, eased 1.51 per cent, ahead of its results today.

Also offering support were heavyweight oil stocks as investors homed in on their reliable revenue streams and shrugged off a slight pullback in high crude prices.

BP added 1.1 per cent, and France`s TotalFinaElf, which also reports today, tacked on 0.42 per cent.

Among the day`s other standouts, German industrial group ThyssenKrupp advanced 3.24 per cent after the Financial Times reported about talks to merge Thyssen`s engineering activities with mg technologies.

Britain`s Big Food Group jumped 18 per cent after the frozen food retailer said its prospects were encouraging and it unveiled a long-awaited debt refinancing. The stock jumped nearly six per cent on Monday.

Shares in German chemicals firm Degussa rose 3.68 per cent after utility E.ON agreed late on Monday to transfer control of the company to coal group RAG as part of its bid to acquire gas firm Ruhrgas. E.ON eased one per cent.

UK media group Daily Mail gained 4.14 per cent, having dodged getting caught up in a newspaper price war.

"Of all the people who are embroiled in the latest cover price war Daily Mail comes out of it best because they`ve got a very strong, well invested title and they haven`t had to resort to the cover price cuts," said Paul Richards, analyst at brokerage Numis.

But UK music group EMI fell 6.55 per cent to new lows for the year as analysts emerged disappointed from a post-results meeting, citing a headwind of negative factors such as falling sales and rampant piracy, and doubts over operating margins growth rates.