Vivendi, dollar sink eurostocks

European indices crumbled to nine-month lows in late trade yesterday, as investors abandoned exporters hurt by the rising euro, fled financials exposed to sickly stock markets, and sold companies with shaky Brazilian interests.

But the day's top blue chip faller was French media giant Vivendi Universal, which crashed to decade-lows on fears it would not be able to stave off a possible credit rating cut, amid talk of a tricky share placement.

Compatriot France Telecom was also whacked after seeing its credit ratings downgraded by Moody's.

"A bit of everything has been thrown into the pot today," said Martin Brooker, pan-European equity strategist at E*Trade Securities.

"The weak dollar is especially negative for equities as most of the big-cap European companies are exporters."

By 1637 GMT, with most markets closed, the FTSE Eurotop 300 index of European blue chips fell 2.74 per cent to 1,020 points - 22 points off its post-September attacks' closing low.

Fallers outnumbered climbers by around eight-to-one. All the DJ Stoxx series of European sector indices were weaker.

The narrower Euro Stoxx 50 index of euro zone blue chips, was down 3.9 per cent.

Indices have fallen for five consecutive weeks on persistent concerns economic recovery will fail to boost profits soon and might even falter, with just a few weeks to go to the start of the second-quarter reporting season.

Red was also the colour for traders' screens on Wall Street, as the Dow Jones Industrial Average index and the tech-heavy Nasdaq Composite shed about 1.6 per cent each.

Exporters came under the cosh as the euro touched $0.98 for the first time in more than two years with doubts over the appeal of US assets and the strength of the US recovery accelerating the dollar's losses.

Among the standout fallers were telecom equipment exporters Ericsson and Nokia, which slumped by about nine per cent each.

Car exporters were also hit after the chief of PSA Peugeot Citroen, down 3.7 per cent, said its 2002 earnings would be at the lower end of its target range.

The dollar has shed six cents against the euro in the last month alone, bringing parity into view.

Six billion euros were wiped off the market cap of Vivendi Universal after the stock slumped by 23 per cent, as investors panicked about the company's cash position and its debts.

Utility subsidiary Vivendi Environnement slid 11.5 per cent amid market talk that the share placement of a 15.6 per cent stake was going less well than expected.

Many insurers and financials were also down as investors worried their balance sheets will come under further pressure as the selling in equities shows no sign of ending.

"Financials are the worry today. The time has come for them to make capital injections into insurance units because equity markets are falling.

This in turn leads to further market weakness," said Andrea Williams, head of European equities at Royal London Asset Management.

Among financials and insurers, Zurich Financial shed eight per cent and Credit Suisse fell 11.4 per cent, even though its Winterthur insurance unit reportedly played down concerns it will need fresh capital injections from its parent.

France Telecom fell 16.2 per cent after credit rating agency Moody's Investors Service cut the telecom operator's credit ratings to one notch above "junk" status, citing concerns that the group will not be able to cut its debt in the near-term.

Latin America also loomed large for investors, where political tremors are exacerbating Brazil's onerous debt refinancing schedule.

Shares in Spain's biggest bank Santander Central Hispano, which has Brazil to thank for 15 per cent of its group profit, fell 6.4 per cent as investors worried about the prospect of victory by the left-leaning frontrunner Luiz Inacio Lula da Silva in October's Brazilian presidential election.

Also caught in the Brazilian crossfire were Spanish telecom incumbent Telefonica and utility group Endesa, Dutch banks ABN Amro and ING, British peer HSBC, Italian carmaker Fiat, and power group Electricidade de Portugal (EDP) - all of which have significant Brazilian business interests.

Not even defensives forecasting a pickup in sales, such as Unilever, could withstand the selling pressure.

The Anglo-Dutch consumer goods giant said it expected top-line growth at its top 400 brands to climb to around 4.5 per cent in the second quarter from three per cent in the first, but its shares fell 1.6 per cent.